![]() Under Lacey, Tessera has exited all manufacturing, trimmed spending, and returned over $250 million to shareholders via dividends and stock buybacks. The pick, Thomas Lacey, still runs Tessera. On the eve of the vote, Tessera surrendered and agreed to put Starboard managing member Peter Feld on its board and let Starboard name a new CEO. Tessera’s incumbent managers resisted Starboard with broadsides, saying that the activists wanted to eviscerate Tessera’s R&D and turn the company into a “patent troll.” As the May 2013 proxy vote neared, however, it became clear that Starboard had the votes it needed. In a decade of running New York–based Starboard, Jeff Smith had replaced directors at dozens of companies, including several–like Unwired Planet and MIPS Technologies–where the fund saw opportunities to realize value from patent portfolios. By the time Starboard mounted its proxy fight in early 2013, Tessera was losing money on declining patent revenues and had cycled through four chief executives in five years. Then earnings began to falter as spending on research and litigation grew faster than revenues, and Tessera got into the business of making camera components. By 2007, annual revenues were $200 million and the shares traded above $40. #Tessera technologies stock license#Royalties and license payments swelled after its 2003 initial public offering of shares at $13. STARTING IN THE 1990S, Tessera developed technologies for connecting computer chips in compact packages that let semiconductor makers like Intel pack their chips into ever-smaller electronics products. Meanwhile, Starboard appears to see better activist opportunities elsewhere. The premium seems unmerited by Tessera’s relatively old collection of computer chip patents. (RMBS), which get more of their revenues from continuing royalties. If you back these finite settlements out of Tessera’s income statement, the remainder of its recurring revenue leaves the company valued at roughly twice the level of other nonpracticing entities–like Investors wouldn’t normally put an earnings multiple on such settlements. A one-time settlement–even if payment extends over several years–isn’t what most analysts would model as recurring. But most of the growth in this recurring revenue hasn’t come from royalties on any licensee’s continuing product sales, but from the one-time settlement of patent disputes that Tessera has structured so as to receive payments over several years. ![]()
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