FWIW, here is a summary of the B of A report. I'm still on the sidelines waiting for some clarity.
4Q10 strong but foot dragging by customers impact 1Q11
Tessera reported 4Q revenue and operating income ahead of our estimates on
stronger than expected microelectronics revenue. 1Q11 guidance, however, was
well below our forecast, impacted by five current and former licensees who either
are not paying or have not renewed their license agreements. We estimate the
impact will be in the $7-8M range in 1Q but with limited visibility into when
customers might re-sign, we reduce our full year 2011 microelectronics revenue.
Restructuring on the Imaging and Optics side of the business will lower expenses
but without a significant product or license catalyst on the horizon, we remain on
the sidelines. We lower our PO to $22 from $23 and maintain our Neutral rating.
Focus might help optics but not material near term
Tessera announced a restructuring to its Imaging and Optics group including a
15% headcount reduction which should drive $10M in annual opex savings. The
division will now focus on only the top ideas like extended depth of field (EDOF),
Zoom and MEMS auto focus. EDOF which has been one of the better performing
I&O royalty streams is still at a low single digit revenue run rate per quarter, in our
estimation. Tessera might benefit by focusing on fewer, higher potential ideas but
we view Imaging and Optics growth as a longer term story
Still lacking a catalyst, adjusting estimates and PO
We expect Tessera to trade at a discount to the 15-16x CY2011E that pure
semiconductor comps trade for due to the lumpy nature of the DRAM contracts
and volatility associated with the legal-related outcomes. We apply an 11x
multiple (30% haircut) on CY11E operating EPS of $1.15 and adding back cash to
give us a $22 price objective, down from $23.
Damned if I know of other comparable cases. Tessera has used a couple of fundamental patents as the basis of its business for a decade now. They look solid, but pretty much all of their key provisions have been opened for re-examination (the legal-techie language is more inflammatory than that: a claim that is being re-examined is said to be rejected).
Again, You can't fairly say the company could triple up on legal settlements without saying that it could also get crushed.
It isn't that I know much about Tessera, but I do keep a bunch of it in mind whatever is going on.
You also stated, "In the extremely unlikely event that they lose across the board on the pending patent re-examinations, they will be sued for return of royalties on improperly issued patents. That in addition to the collection suits and arbitration being ended. Not survivable."
Please give examples of other companies that are in the same situation. I have been in other IP companies that are involved in litigation on a regular basis. I am not familiar with your speculated scenario.
Any analysis of TSRA that completely ignores pending legal matters is trash. You can say stuff about lumpy and unpredictable, but here's a company with an enterprise value around $800MM and with matters under adjudication that could bankrupt it or bring in quick payments as high as $2.5 billion. It's not just ONE elephant in the room.
bankrupt them ? ... sorry pal ... but that is bull !!!
They are not is that kind of situation, period ... you forget about how much money they have in the bank and you forget to mention that they are on the winning side of the QCOM + other infringers lawsuit !