Rambus (RMBS), Toshiba Renew Patent Licensing Contract

Rambus Inc. RMBS recently announced the renewal of its patent licensing agreement with Toshiba Corp. for three years. Per the terms of the agreement, Toshiba can use Rambus' patented DRAM memory controllers, serial links technology as well as Flash Memory and system products.
 
Rambus will receive royalty payments during the contract period. This renewal agreement is a continuation of a long-standing relationship between the two (Toshiba was Rambus' first licensee). According to Luc Seraphin, senior vice president and general manager at Rambus "Toshiba has been a valuable customer of Rambus for more than a decade, and this renewal reinforces the value of our innovative technology and IP."

In July this year, Rambus renewed its patent licensing agreement with Renesas Electronics Corporation, a company formed through the merger of Renesas Technology Corp. and NEC Electronics Corporation. Per the terms of the agreement, Renesas Electronics can use patented innovations by Rambus in its broad range of logic integrated circuit (IC) products.

California-based Rambus designs, develops, and licenses chip interface technologies and architectures that are used in digital electronics products.

The company reported mixed third-quarter of fiscal 2015 results with the bottom line beating the Zacks Consensus Estimate but the top line lagging the same. However, year-over-year revenue comparisons were favorable mainly driven by higher revenues from the new license agreement signed with International Business Machines Corporation IBM during the first quarter and the extension of a license agreement with SK Hynix in the second quarter.

Though Rambus guided a sequential decrease in revenues, we believe that the increasing licensing agreements will allow the company to surpass its own guidance.

Licensing agreements are a recurring revenue source for Rambus, the result of successful monetizing of its patents. Rambus' patented technologies are of great importance to chipmakers for manufacturing advanced chips used in computers and electronic goods. Rambus has already licensed its technology to Fujitsu Semiconductor Ltd., NVIDIA Corp. NVDA, Broadcom Corp. BRCM, Nanya Technology Corporation, Samsung Electronics, Micron Technology and MediaTek Inc. for their respective integrated circuit products.

Going forward, we believe that Rambus' growth story would remain intact, given its ability to settle legal claims, growing exposure to the LED segment and continued deal wins.

Currently, Rambus has a Zacks Rank #3 (Hold).

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