My simple take
Posted by: patriotism on November 26, 2007 09:47AM
Facts:
The stay order granted by Judge Ward ends on friday.
According to the SEC-Rules Material Events have to be filed immediately in a 8k-filing also from lawsuits.
From the past we've learned, that PDS being a non public company, the SEC accepted, that the revenues in the past and now generated from license activities by PDS for PTSC, are regarded as business as usual, so that they do not have to be filed in a 8k-filing by PTSC and the final overall numbers for the quarter only must be shown in the quarterly reports of PTSC.
We also know from one of the last shareholder meetings, that PTSC would and has to file immediately an event of such an unusual importance, when there is a signing/settlement/trial victory for huge amounts.
As Albie pointed out here, the answers and arguments given by the owner regarding the reexamination process of the 584' patent, show such a strength from an objective view of non specialists, that the chances to receive the final validity for this special patent from the USPTO now seems to be much more higher than in the past.
As of today the USPTO didn't issue a final decision about the reexamined patents.
After the 584' was dropped from the Texas Case, the case was ongoing only with the two patents 148' and 336'.
So generally, settlement talks will include these two patents. Whether the 584' patent will be included or not is pure speculation and nothing else! The terminus MMP-Portfolio used in this context from some of the boardmembers in my opinion is wrong, because the MMP-Portfolio has more than this 2 patents.
ARM is not a part of the appeal for the 584' according to the Pacer documents, that wolf has provided here on this board.
My take on this all is very simple:
The stay order was granted for reasons nobody in the public knows. I'm in the camp of those here, who speculate, that the ACP ruling might have forced the decision of this stay order finally.
5 days to go from here until we all will know, if this case settles or not. My overall interpretation of the situation indicates clearly a settlement. I'm expecting, that the settlement amounts will be annouced immediately for these reasons:
1. SEC-Rules (the PTSC part of such a settlement in connection with the unusually high amounts absent from the business as usual)
2. After 10 years of legal battles the plaintiffs will want to show the strength of their position and the MMP-Portfolio
3. The Plaintiffs will want to give the message to other possible infringers, that the patents are strong and that it is better to sign qickly than later
4. An announcement of huge amounts will show the value of the portfolio and signalize other possible infringers, that there will be a correlation between the results of that settlement and future signings regarding the total $ amounts
5. The overall marketing effect of such a big news for TPL/PTSC and the shareholders will be great
The 584' answers of the owner show some significant strength for this patent from the view of all non experts. The 584' patent actually is a non issue in the overall scheme of the upcoming decision about a settlement, because a settlement for PTSC means: The risk of a loss at trial will be gone. The fears of investors to lose the case will be gone. The material effects of a settlement will bring PTSC in the high comfortable role, to improve the shareholder value significantly and to plan a future absent from IP-Licensing. That beeing said, the 584' patent is actually not very important, as many here describe it at the moment. Surely it would be nice to see the 584' patent as one part of a settlement and the appeal being cancelled, but in the overall scheme, it is quite unimportant actually, because the main issue is a settllement right now for the 336' and 148' patents and nothing else from my point of view!
I do not expect a final USPTO decision for one or all patents this week, because it looks like the parties are trying to settle. Why should the USPTO influence the parties, when they want a settlement? I can't see a reason for the USPTO to decide about the validity of the patents right in front of a possible settlement after more than 3 weeks of the stay order now are over.
The 336' and the 148' for me are a bank after the Markman Ruling. So if there will be a final decision of the USPTO in the near future I'm expecting, that they prove both patents valid. If the 584' patent will stay in the appeal, I see good chances for a final validation of this patent also.
As I've stated here many times before I'm anticipating a settlement range between $ 110 M - $ 180 M. I'm expecting the revenues for PDS delivered until now in this quarter from the 4 existing signings including Royal Philips to be around $ 20M. I see a domino effect in place after the announcement of the stay order supported by the 584' answers of the plaintiffs regarding the USPTO Reexamination. I expect the domino effect ongoing after a settlement and increasing after the USPTO would assure the validation of the 336' and 148' patents, which I see very strong after the Markman Ruling. The financials will reflect this anticipated development. Overall I'm expecting $ 0.15 - $ 0.19 EPS until the end of May 2008 (fiscal year end PTSC).
The issued Cohen Report shows a price target for PTSC under the circumstances, that PTSC delivers $ 38 M in net income for the fiscal year and 415 M OS diluted, including a $ 10 M share buy back, at the end of the fiscal year in May of $ 2.31. The results are based on the DCF-Modell and Equtiy Earnings of $ 60 M from PDS leading to EPS of $ 0.09 and a P/E Ratio of 25 in Cohens opitistic case scenario (in different terms of this analysis Cohen has stated, that they expect PTSC to outperform these results in a strong way).
So if I now calculate again for example a $ 140 M settlement without the current delivered 4 licenses in this quarter, which I expect to be around $ 20 M for PDS, a settlement in this area alone would lead to the Cohen results ($ 20 M litigation costs included; $ 120 M for PDS, 50 % = $ 60 M for PTSC) of $ 38 M in net profits for the fiscal year including a $ 10 M share buy back. And we've 6 months to go from here until the end of the fiscal year, 4 licenses for this quarter in the pocket, $ 23M cash on hand, 18 M shares already bought back with an average of $ 0.62, that will increase the value of the company additionally above this shareprice. And the most important thing is the anticipated upcoming domino effect from a settlement for the next 6 months leading to strong additional signings! (Holocom and SSDI numbers not included)
So from a long perspective I'm very confident, that we'll gone see a massive shareprice improvement in the next 6 months beginning hopefully soon with settlement news. We should not forget, that the signings of HP and Fujitsu in 2006 for high amounts alone moved the shareprice over 6 weeks form $ 0.17 - $2.21, because the market at this time additionally anticipated a domino effect and the end of the Texas Case. So the question is, what will gone happen, when the Texas Case is settled, the USPTO declares the patents valid and we will see ongoing signings in a high frequenzy at higher rates?
My summary:
I will stay long and I will not think about the selling of one single share until we reach a shareprice of $ 5. I also expect a strong upmove this week (settlement speculations) and I hope for all the daily gainers out there, that they are on the right side, when the shareprice begins to surge......
All IMHO
Be well and good luck to all! But it all depends on a settlement and huge amounts as described above and as allways we shall see!
Patriotism
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