(RMBS) Rambus LED Solution for Fern Howard

Earlier this week, Rambus Inc. (RMBS) signed a patent licensing agreement with Fern Howard for an undisclosed sum. Alton, Hampshire-based Fern Howard is a recognized producer of energy efficient lighting solutions.

Per the terms of the agreement, Fern Howard will obtain Rambus’ patented technology for its advanced lighting products. Rambus will receive royalty payments based on the shipment of these devices during the contract period.

Rambus’ patented innovations include LED edge-lit optical designs, MicroLens light distribution features, high-volume, low-cost light guide panels, and multi-function film manufacturing technologies. These technologies facilitate lighting and display solutions vendors to include advantageous features of LED in each lighting solution at an affordable price.

LED or light emitting diode is a semiconductor light source used as indicator lamps in many technological devices and are increasingly being used for general lighting products. LEDs are energy efficient, long lasting, space saving and more expensive than incandescent light sources.

With the rising popularity of energy-efficient lighting, the in-vogue LED products are finding place in the latest architectural, retail, commercial and residential lighting fixtures. We find Rambus in a favorable position for a share of this opportunity.

Rambus secures a good amount of multi-year licensing deals in a year, most of which are from semiconductor companies. In the past few months, Rambus has licensed its technology to NVIDIA Corp. (NVDA), Broadcom Corp. (BRCM) and MediaTek Inc. for their respective integrated circuit products.

However, Rambus remains entangled in various legal tussles with respect to patent infringements. Though the company had witnessed some victorious moments defeating tech big shot NVIDIA, it lost lawsuits against Micron Technology Inc. (MU), LSI Corp. (LSI), Hynix Semiconductors and STMicroelectronics (STM). The back-to-back losses have shattered investor sentiments, as reflected in its share price.

Furthermore, we are concerned about Japanese chip-maker Elpida’s declaration of bankruptcy. Elpida accounts for roughly 10.0% of Rambus’ annual revenue. This would be a direct hit to its patent licensing royalty.

Despite the current volatility, we believe that Rambus’ growth story remains intact, given its ability to settle legal claims with some tech companies and secure deals from them. Moreover, we expect synergies from the acquisition of privately-held memory technology provider Unity Semiconductor Corp. in February.

Currently, Rambus has a Zacks #3 Rank, indicating a short-term Hold rating.
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