Unwired Planet: Can Cash Position Cushion Long Sales Cycle?

With three recent Markman hearings and more than $100M in cash UPIP trading currently at $1.46 could be a good buy for those with patience and a strong stomach.

At an earnings call last Thursday Unwired Planet, Inc. (NASDAQ: UPIP)  CEO Philip Vachon reiterated his confidence in the future, and announced a renegotiated deal with Ericsson that will provide the company more flexibility going forward regarding patent transactions.

“With the modification of the Ericsson agreement during the [past] quarter, the company now has the option to acquire assets that are not subject to the Ericsson revenue share agreement,” Vachon told investors,”but that are subject to the $1.7 million of our NOL.”

Lake Street Capital senior equity analyst Mark Argento who has a “Buy” recommendation on UPIP, suggests that investors proceed with caution, but sees a $5.00 price target.logo

Sum of Parts Valuation – “Given the nature of its business model and the lack of revenue and operating profit predictability from a modeling perspective,” says Argento,” “we believe valuing UPIP on a project/IP portfolio sum of parts valuation basis is most appropriate. We take various scenarios: Low, Mid, and High range of outcomes for monetizing both its core UPIP portfolio and the wireless infrastructure portfolio acquired from Ericsson.”

Argento’s list of “Valuation” challenges and “Risks” in his report (linked above) provide useful guidance for anyone interested in public IP licensing sector.

Spend and Wait

Unwired Planet is typical of the frustrations faced by many PIPCOs that own good patents but have to spend time and money, and encounter risk, to monetize them.

Spending on legal fees and acquisition costs, without generating significant income, requires a strong constitution, even when there is cash on the balance sheet and burn rate that can be contained. Not every PIPCO is so lucky.

Image source: unwiredplanet.com; lakestreetcapital.com

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