Rambus, Western Digital Climb On Licensing Agreement – Barron’s (blog)

Rambus (RMBS) is higher Tuesday, after announcing a licensing agreement with Western Digital (WDC) late Monday.

According to the press release, the agreement covers the use of Rambus patented memory technologies, including high-speed interfaces, memory architectures, resistive memory and security technologies, in Western Digital products through 2021, with an optional 5-year extension. No specific terms were disclosed.

Benchmark’s Gary Mobley reiterated a Buy rating and $15 price target on the stock following the news:

We view the license agreement as unique and intriguing as Western Digital is an unlikely licensee for RambusRambus memory patent licensing has historically been within the DRAM industry (e.g. Samsung, SK Hynix, Micron) and not the NAND flash market. While it is possible the broad license agreements relates to high-speed I/O for certain types of flash storage, we believe the underpinnings of the patent license agreement may relate to Rambus‘ ReRAM IP portfolio, something valuable to Western Digital’s plans to enhance high-performance SSDs with a storage class memory (SCM). It is also interesting to note that the patent license agreement includes Rambus‘ security IP, which could be broadly applicable to many of Western Digital’s HDD and flash-based SSD products.

Elsewhere, JPMorgan’s Paul Coster reiterated an Overweight rating and $14.50 price target, but added the stock to the firm’s  U.S. Analyst Focus List as a near-term long idea. Coster writes that the pullback following the company’s fourth-quarter earnings provide a good entry point, and he also sees good near-term revenue and earnings visibility. 

Rambus shares are up 3.5% to $13.24 in recent trading, while Western Digital is up 0.5% to $77.22.


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