Aware, Inc. (AWRE)

[Terin]

Article: Chasing Or Shorting 3 High-Flying Stocks?

Aware, Inc. (AWRE)

Another company with shares on a tear is Aware. It provides biometrics software and DSL service assurance products. Though they're not going to offer the latter for much longer:

The decrease in hardware revenue was mainly attributable to our decision in January 2012 to shutdown our DSL service assurance hardware product line. [Q1 PR]

The biometrics and imaging software did have a good quarter though, albeit the total result was still disappointing with total revenues falling 10% (YoY) to $5.7M.

Some metrics [Yahoo]:

Market cap $143.6M on 20.72M shares
Revenue $24M
Cash $49M with zero debt

They generate cash ($6.6M last year, albeit almost half of that by running down inventories and accounts receivables)
So, what we have is a company that is shrinking, shredding its shrinking business, sitting on a huge pile of cash while generating some more. It's all about what they're going to do with that cash. But there is more. On April 27, they announced the following:

Aware, Inc. announced today that it has signed an agreement for the sale of selected patents and patent applications to Intel Corporation for approximately US $75,000,000.00, subject to customary closing conditions and any required regulatory approvals. The patents and patent applications relate to WiFi (802.11n/ac), LTE and Wireline Home Networking. The sale is part of our patent management operation's efforts to sell and/or license portions of our patent portfolio.

And this might not even be all, as they're looking to monetize other patents they have.

We assume that the cash figures from Yahoo do not yet include any of this, which yields a total cash position of $125M, almost the entire market cap of $143M. What are they going to do with all that cash seems the overriding issue here. Well, $24M of it will be dealt out in a special dividend, amounting to $1.15 per share which will be paid on May 25 (to shareholders of record on May 11).

So until May 11, the shares will likely hold up quite well. But after that there seems to be room for some downdraft. However, for the longer term, the biometrics and imaging business they have isn't at all bad. In the last quarter, this generated $3.67M in revenue and $1.7M in profit, up from $2.9M and $1M in Q1 2011, respectively [10-Q May 3].

So their business could do $8M in profits this year, on top of $100M in cash, the present market cap of $143M that seems very reasonable. But, of course, it depends what they're going to do with that booty.

As you can see, the shares have had quite a run. Although that isn't at all surprising (on the $75M sales of patents), we expect the shares to calm down after the relevant ownership date of the shares for the $1.15 special dividend has passed on May 11.

http://seekingalpha.com/article/569261-chasing-or-shorting-3-high-flying-stocks?source=yahoo