Arper,
I suppose we invest in stocks for the long term and because of value of assets not because we are looking to 'trade'. Many in this stock in the past and to date have certainly been 'traders' and have made a great deal of money doing so. In the long run however, being an active trader has proven to be less effective that investing in the index for the vast majority of people.
As a result, we don't look at one time 'catalysts' as quick day trade or swing trade entry and exit points, we look at the long term opportunities and don't ignore the past either.
Certainly, our little VRNG has had a tough couple of years. That being said, we believe VRNG was blindsided by the CAFC and unfairly so, and this set off much of the financial issues that led to a less than preferred deal with ZTE. In our view it was less about management and more about an effort to financially cripple VRNG, which Google almost accomplished. Again, this doesn't absolve high comp etc, but that comp issue is merely an annoying fly in the room, not the elephant.
Our group has focused more on this comment in the recent PR, than apparently the market has
"Vringo is committed to further monetizing our portfolio of intellectual property assets. We seek to obtain fair, reasonable, and non-discriminatory (FRAND) licenses to our standard essential patents. While we are more than willing to aggressively pursue our legal rights, Vringo is very pleased to be in discussions with several parties in an effort to achieve mutually agreeable license terms," said David Cohen, Vringo's Chief Legal and Intellectual Property Officer.
"We are continuing to unlock the value of our patent portfolio, which contains a number of proven assets, including one of only two standard essential telecommunication infrastructure patents ever found valid and infringed in the United Kingdom. The addressable market for our portfolio captures not only traditional wireless infrastructure equipment, but also cutting edge small cell infrastructure technology. Small cells are forecast to become a $6 billion market by 2019," continued Mr. Cohen."
The highlighted areas above, in particular the first on the SEP patents has been completely ignored by the market. And perhaps rightly so, the stock is now in a 'show me' stage, which is fair. However, given many in this stock are traders, they seem to be looking for the next pop or next drop to trade, we care little about that.
Indeed, while many have been disappointed with the ZTE settlement, it is possible when you consider Mr. Cohen's point above (on discussions with several parties on the SEP patents), that ZTE did us a favor.
The amount ZTE paid is negligible to them. It is material to VRNG. ZTE is much smaller than a number of other Chinese telcos who are likely infringing. Indeed, if you recall, in ZTE's internal emails, they state quite directly that many others in China are infringing.
As a result of the settlement with ZTE
1. The patents have been validated by a competitor to those companies. Does this mean they will not challenge them no, but it helps with legitimacy in the competitors eyes.
2. ZTE competitors saw how much cost and pain ZTE went through to lower the cost of the license to a VERY LOW FRAND rate (arguably not even FRAND, below FRAND).
3. ZTE competitors, and any company for that matter does not 'fight for the sake of fighting' they do so for economic advantage (remember make war to make peace?).
4. So when one of those competitors now sees that ZTE pushed this rate so low, at a high cost, they will ask themselves, is there any economic advantage to a brawl in court to attempt to pay an even lower rate? They will do the math and see, well it will cost us likely $20-30 mil in legal fees, potential disruption to our company (injunctions) and disruption in sales, then the courts may even cause us to pay MORE than ZTE's rate since it was very low, and in the end, we pay double or more than we do now.
5. A rational actor says, ok we'll pay the same rate on a % basis as ZTE, and if larger, we get a bit of a discount for scale.
6. In the end, while 20-40 mil isn't large to a player like Huawei it is VERY material to VRNG.
That is the reason we are long this stock, not "one offs" that may or may not be material since we have no view or insight into the value being attributed to those patents (ie DTV). Indeed, most of the 'one offs' have been immaterial, so we have never payed much attention to them.
To us, this company's value has always been very much tied to the Nokia SEP patents, had VRNG not had these, we would have exited post Google.
Good luck to all REAL LONGS!
---------------------------------------------------
This Information is not intended to be and does not constitute financial advice or any other advice, is general in nature and not specific to you. Before using this or any information to make an investment decision, you should seek the advice of a qualified and registered securities professional and undertake your own due diligence. None of this commentary is intended as investment advice, as an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any security, Company, or fund. You are responsible for your own investment research and investment decisions.
