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Why we like PTSC right NOW !!!
Patriot Scientific, an Intellectual Property (IP) licensing company that develops, markets and enables innovative proprietary technologies, announced today it was ranked #4 in the Deloitte and Touche LLP "Technology Fast 50" for the San Diego area, based on its phenomenal 2,772% growth over the past five years. Patriot ranked above such well-known companies as Qualcomm; DivX, Inc.; Leap Wireless, and others.
The Outlook for Patriot Scientific Corporation
Patriot Scientific has developed and acquired the intellectual capital that is fundamental in the design and manufacturing of microprocessors and microcontroller chips.
• The Company's intellectual property is covered by U.S., European and Japanese patents, good through 2015.
• The patents cover fundamental functions within a microprocessor including (a) core processor speed differential which enhances performance and lowers power consumption, (b) multiple instruction fetch for faster operations, and (c) on-chip oscillators that cover multi-core and multiprocessor implementations.
• The Company began to license its intellectual capital to the microprocessor market in FY05. Of the roughly 500 potential licensees of Patriot Scientific's intellectual capital, only 23 have purchased license agreements for the Company's intellectual property.
• Patriot Scientific has entered into a joint venture with Technology Properties Limited (TPL) to aggressively license the company's intellectual capital. The joint venture, Phoenix Digital Solutions, is jointly managed by the two companies, enabling the Company to pursue additional revenue streams.
• Existing patent licensees include Intel, AMD, Hewlett-Packard, Casio, Olympus and Sony.
• The total market for products with microprocessors is enormous and difficult to pinpoint. We estimate it is between $200 billion and $2 trillion annually. Computers only constitute approximately 2% of the total microprocessor market by unit volume. Microprocessors and microcontrollers are used in computers, printers, communication devices such as mobile phones and PDA's, home appliances, automobiles and numerous industrial applications.
• Through SSDI, the Company markets data-protection hardware for secured networks. Customers are government, military and high-security networks.
• Large cash balances from intellectual property licenses have been used to clean the balance sheet. The Company has no long-term debt and is buying back stock.
• The Company is seeking acquisitions in hardware/software technologies to create a revenue stream beyond patent expiration.
Valuation Summary
We value Patriot Scientific common stock using our Discounted Cash Flow (DCF) valuation method. We used three different scenarios – Base Case, Optimistic Case and Pessimistic Case. The timing for our valuation analysis is the next 12 months. Based on our valuation approach, we derive the Base Case target price for the stock is $1.03. We believe this is very conservative due to the accumulation of large cash balances from licensing sources that will be reinvested in acquisitions and stock buybacks. We believe our Optimistic Case target price of $1.54 most likely describes where the stock will trade in the next 12 months. Even our most conservative Pessimistic Case scenario describes a target price of $0.79, almost twice the current stock price.
The stock has been trading between $0.34 and $0.65 for the past six months. In early 2006 the stock ran from $0.10 to over $2.00 in less than two months, and has declined into its current range since the price peak of March 2006. We believe when the market fully appreciates the Company's strong cash flows and acquisition strategy, the stock is likely to trade above our price targets.
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