Chip technology developer, Tessera Technologies Inc. (TSRA) has provided its guidance for the third quarter ending September 30, 2012. Following the news, the company’s shares rose 4.36% in extended trading hours.
Tessera expects revenue in the range of $66.5 million to $69.0 million, up 8% to 12% from the prior quarter. Revenue from the Intellectual Property segment is expected to be $53.0–$54.0 billion, which includes approximately $20.0 million received from favorable rulings related to its dispute with Amkor Technology, Inc. (AMKR). The DigitalOptics segment revenue is expected to be $13.5–$15.0 million, comprising royalties and license fees of $2.0 to $2.5 million, and products and services revenue of $11.5 million to $12.5 million.
Tessera remains optimistic about revenue coming from the renewal of licensing contracts as it has been scoring legal wins in recent times, and expects other big companies to renew their licenses going forward. In the last quarter, Tessera announced that its wholly-owned subsidiary Invensas introduced two new packaging technologies that were in the process of commercialization. The company is also developing other licensable technology beyond the traditional packaging area that would translate to additional revenue going forward.
On the DigitalOptics side, Tessera has been seeing some success with its new MEMS lens subassembly. The segment has transitioned from an imaging and optics focus to an original design manufacturer (:ODM) of camera modules for the mobile phone market. Since the camera module business is yet to take off, Tessera expects volume shipments in the December quarter.
Other guidance included non-GAAP operating expenses of $57.0–$59.0 million and GAAP operating expenses of $67.0–$71.0 million, including stock-based compensation in the range of $4.0 to $5.0 million and amortization expense of $6.0 to $7.0 million. Litigation expense is expected to be significantly higher than the $6.7 million reported in the second quarter owing to increased activity in ongoing cases.
Tessera is a provider of back-end technology for semiconductor manufacturing. The company has a strong balance sheet, with $474.8 million in cash and short-term investments and no debt. The company’s financial strength allows it to invest in attractive growth opportunities through the economic cycle. However, the company continues to be impacted by pricing pressures in the sluggish dynamic random access memory (DRAM) market.
Currently, Tessera has a Zacks #3 Rank, which implies a Hold rating in the short term (1-3 months).
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