Dataram Corp. (Nasdaq: DRAM)
Dataram Corp. trades on the Nasdaq under the ticker DRAM. Dataram is a leading manufacturer of computer memory products and provides solutions that increase the performance and extend the life of computer hardware from well-known manufacturers such as Dell, Cisco, Fujitsu, HP, IBM, Lenovo and Oracle. Dataram’s memory products and solutions are sold worldwide to OEMs, distributors, value-added re-sellers and end users. In addition, the company manufactures and markets a line of Intel-approved memory products for sale to manufacturers and assemblers of embedded and original equipment. Seventy “Fortune 100” companies use their products and services. The corporate headquarters is located in Princeton, New Jersey and their manufacturing facility is located in the United States with sales offices in the United States, Europe and Asia.
Dataram has designed memory products for more than 50,000 systems with an established presence in the US and plans for expansion into Asia and Europe. It offers one of the most complete portfolios in the industry and the products range from energy efficient DDR4 modules to legacy SDR offerings. The growth strategy is to pursue organic and inorganic opportunities. This includes potential acquisitions such as US Gold Corp. Shipments, on a year-on-year basis, have been increased by more than 35% to an international customer base. The company has new leadership and improved corporate governance and enjoys a unique competitive advantage in its product offerings and services.
Between 1967 and 2008, the company was known as the gold standard for third-party memory providers but changed course in May 2008 and entered into non-synergistic and non-core growth opportunities. Over the last few months, the company realigned its mission to focus on pursuing its core business of memory products and solutions and delivering value to customers. The annual cash losses have been reduced from almost $3.8 million in FY 2015 to $0.4 million in FY 2016 before, non-cash and other charges and the projected revenue for FY 2016 is $25 million. Among the competitive advantages of the company are superior design and engineering services, including assistance with configuration, contract and flexible manufacturing to take care of special customer needs, including custom solutions, direct technical and engineering assistance and financial incentive programs, buyback, trade in/trade up, and cost analysis, allowing customers to optimise procurement and receive significant and measurable cost savings while allowing the management of end of life transition.
Important programs include lifetime warranty in which memory upgrades are warrantied to be free from defects in materials and workmanship, and conform to the manufacturer specifications for the system originally installed. Critical outreach liability insurance provides peace of mind to customers through prepaid technical support. The 24/7 on-site space program provides replacement for an immediate swap out in the case of memory failure. The prepaid on-site service support means that the service provider performs the determination of problems related to memory and resolving them using pre-purchased service hours. They have implemented a 24 x 7 technical support program and services the provider from inception to solution.
DRAM – outlook and growth opportunities
According to Markets and Markets, the non-volatile memory market is expected to touch $18.54 billion by the end of 2020 to with an estimated CAG are of 9.93% between 2016 and 2022. Statistical reports suggest that in 2010, revenue from DRAM sales came to $39.68 billion. Dataram’s immediate challenge is to increase channel inventory to counter sluggish demand. The balance of supply/capacity is underway and there are continuing declines in price. Demand is generally sluggish with variable enterprise demand while the cloud, mobile and OEM segments are more consistent. The longer-term challenges include the rebalancing of inventory levels to reflect market demand and advancement in technology. The low supply growth and the managed and balanced capacity, slowing technology migration and supplier consolidation are being countered by establishing deeper tier 1 supplier relationships, focused investment and calculated acquisitions. The company expects that over the next few months top-line revenue will grow to more than $50 million with improved margins, diversified offerings and increased capabilities.
The proposed acquisition of US Gold Corporation, which is a U.S.-based focused gold exploration and development company with two high potential projects are intended to diversify the activities of the company and reduce costs. The company believes that the business model will be diversified and risks will be mitigated, along with the strengthening of the balance sheet because US Gold has no debt and cash in the region of $4 million. The acquisition also improves the margins of the memory business because costs will be shared, thus reducing the duplication of shared services.
The bottom line
One reason for investors and potential investors to be pleased with DRAM stock is the announcement from the company that it has regained compliance for continued Nasdaq listing removing a major uncertainty through a reverse split of the stock. DRAM closed at $1.09 EOD November 18, 2016. As always, perform your own due diligence before making any investments.