First, I like to say it's real nice to be free from RB's technical problems. Jeez. This what I think of PTSC.
Facts:
1) PTSC owns 50% of the Patents (TPL owns the other 50%)
2) $260 billion industry (some argue more)
2) Royalties - unknown but assume a conservative 1%
- Admittedly PTSC may not sign every infringer but at the same time they are going to get a ton of cash from some others (i.e. RIMM and NTP - settlement $612.5 million or to a lesser extent more than likely at the least minimum standard of 2-3% in royalties). I'm only basing my equation off 1%.
Intel, AMD, HP, Casio, and Fujitsu have already singed agreements.
There are at least 150 companies infringing on their technology, but probably more.
4) Shares Outstanding - 400,000,000 w/ dilution
Formula:
2,600,000,000 = (1% royalty of the $260 billion industry)
Divide by 2 (because PTSC gets half after splitting it with TPL)
= 1,300,000,000 (minimal expenses makes revenues almost pure profit)
Divide by 400,000,000 (amount of shares w/ dilution)
= 3.25 per share
Multiply P/E of 20
$65/share
Why do I choose 20 for the P/E. The big positive cash flow companies that are mature MSFT, CSCO, YHOO, etc. hover a little over a multiple of 20. Realistically on its way up PTSC could easily justify a P/E of 100 or more because their revenue growth is explosive unlike the more mature companies. Over time the P/E would taper down. Even at a lousy P/E of 8, I come up with over $25/share. That doesn't factor in the fact that PTSC could actually make way more than my example of 1.3 billion dollars in royalties (again RIMM vs NTP settled for $612.5 million and that’s only 1 darn company). At some point, probability says that at least few of these infringers will be paying RIMM type settlements.
Check my math. Do it for yourself. The numbers are truly staggering without exaggerating.
Unlike most stocks this process is happening NOW (almost instant gratification) – not at some later date, not next year, and not for some future event to occur just so the company has a chance. The time is here and now. The steps to get to this process have already been completed as evidenced by their most recent signings. PTSC works everyday to secure licensing deals with infringers. At any moment 1, 2, 3, or more settlements may be announced. Just 1 more settlement could have a huge impact on the stock price. We can’t wait forever, and we haven’t. We have only waited 2 months for a new settlement. I don’t think we will have to wait very long for the next settlements in my opinion.
Most importantly, their language states, “Dozens of companies are seeking licensing agreements.” I’m not reading into it; I’m just reading it. The message sounds pretty clear to me.
Am I missing something. Realistically, while I haven't actually counted possible infringers one by one, the number seems like it could be way more than 150. What electronic companies don't make products with embedded microprocessors that are over a 120 Mhz.
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