Rambus (RMBS), Western Digital Sign Licensing Agreement

Rambus Inc. RMBS signed a patent licensing agreement with hard disk drive (HDD) manufacturer Western Digital Corp. WDC for an undisclosed sum. Per the terms of the agreement, Western Digital can use Rambus’ patented technology for its memory products for five years.

Western Digital designs, develops, manufactures and markets a broad line of hard drives featuring leading-edge technology. The company's hard drives are designed for the desktop PC market and high-end hard drive market. Of late, the drives are being used for audio-visual applications such as new video recording devices.

Rambus will receive royalty payments during the contract period. According to Luc Seraphin, senior vice president and general manager of the Interface Division at Rambus, “This agreement with Western Digital provides access to our patented memory technologies that address the challenging requirements of modern data centers.”

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

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.

Going forward, we believe that Rambus is well poised to capitalize on the rising popularity of energy-efficient lighting and LED products in the latest architectural, retail, commercial and residential lighting fixtures.

Notably, Rambus is going through a restructuring phase and we expect it to yield favorable results.

Furthermore, the acquisition of certain serial link assets of Semtech Corporation’s Snowbush IP and Smart Card Software will enhance its product offerings, thereby boosting its top and bottom line performance in the to-be-reported quarter, in our view.

Nonetheless, competition from Semiconductor Manufacturing International Corp. SMI and Advanced Micro Devices AMD, and customer concentration remain headwinds for the company.

Rambus’ stock price has declined 1.36% over the last one year, underperforming the Zacks Categorized Electronics-Semiconductors industry, which showcased an increase of 73.77%.

Currently, Rambus has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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