Thursday, after the bell, chip-packaging company Tessera Technologies Inc. (TSRA) reported lower profits and revenue for the fourth-quarter and updated its revenue outlook for the first-quarter of 2010. The company also revealed that it has appealed the ITC ruling in the DRAM suit.
On a GAAP basis, the company's net income for the fourth-quarter ended December 31, 2009 was $6.4 million or $0.13 per share, compared to $7.69 million or $0.16 per share in the year-ago quarter.
The GAAP net income for the fourth quarter of 2009 included non-cash charges of $7.5 million for stock-based compensation and $3.3 million for amortization of acquired intangibles. The year-ago quarterly net income included non-cash charges of $7.25 million for stock-based compensation and $2.92 million for amortization of acquired intangibles.
Excluding items, the company's non-GAAP net income for the quarter was $16.01 million or $0.31 per share, compared to $16.02 million or $0.33 per share in the year-ago quarter.
Tessera's quarterly revenue dropped to $56.5 million from $69 million in the comparable quarter a year before.
On average, 7 analysts polled by Thomson Reuters expected the company to earn $0.13 per share on revenue of $55.99 million. Analysts' estimates typically exclude one-time items.
The company generates revenue from royalties and license fees as well as from products and services. In the fourth-quarter of 2009, royalty and license fees were $51.7 million, while product and service revenues were $4.7 million. This compares with royalty and license fees of $62.5 million and product and service revenues of $6.5 million in the year-ago quarter.
For the full year of 2009, Tessera's GAAP net income rose to $69.79 million or $1.42 per share from $4.64 million or $0.10 per share in 2008.
On a non-GAAP basis, the company's net income for the year was $101.4 million or $2.02 per share, up from $36.2 million or $0.74 per share a year before.
Tessera's total revenues in 2009 climbed to $299 million from $248 million in 2008.
Wall Street analysts were looking for earnings of $1.42 per share and revenue of $298.98 million.
Based on its assessment of recent public announcements from certain licensees, the company now expects first quarter 2010 total revenues to range between $58.0 million and $61.0 million. This compares to the company's previous guidance, given on January 6, 2010, of between $59.0 million and $61.0 million. Analysts have a consensus revenue estimate of $60.07 million.
It was quite a disappointment for Tessera when the U.S. International Trade Commission, or ITC, on December 29, 2009 said that it found no infringement of the company's patents by certain DRAM chips and module makers, as claimed.
The patents in question are related to certain DRAM memory chips, DRAM memory modules and computer systems incorporating such chips and modules.
In December 2007, Tessera filed a complaint requesting the ITC to investigate the unlawful importation, sale for importation and sale after importation of certain small-format BGA (ball grid array) semiconductor packages and products that include these packages.
The companies named as respondents in the ITC complaint were A-DATA Technology Co., Ltd., Acer Inc., Acer America Corp., Centon Electronics, Inc., Elpida Memory, Inc., International Products Sourcing Group, Kingston Technology Co., Nanya Technology Corporation, Peripheral Device and Product Systems, Inc., Powerchip Semiconductor Corp., ProMOS Technologies Inc., Ramaxel Technology Ltd., SMART Modular Technologies, Inc., and TwinMOS Technologies Inc. None of these companies is a Tessera licensee.
Tessera had also filed a concurrent action in the U.S. District Court for the Eastern District of Texas against the same companies then.
The ITC, which accepted Tessera's case, on January 3, 2008, initiated an investigation into the unlawful use of the company's patents by certain DRAM devices and products incorporating them.
Tessera, which asserted infringement of three of its patents, has been seeking, among other things, an exclusion order barring importation of infringing products that incorporate the patented technology.
Meanwhile, when the case was still under review, two of the respondents named in the DRAM suit - International Products Sourcing Group and Peripheral Devices & Products Systems, Inc., settled with Tessera last year, agreeing to pay royalties on its past and future sales of products using Tessera technology.
Another respondent A-DATA Technology Co., agreed not to import or sell for importation into the United States any products infringing Tessera's asserted patents and was dismissed from the ITC action.
Tessera's DRAM suit came under Section 337, which guaranteed the right to be heard by an administrative law judge.
In August 2009, the Administrative Law Judge, or ALJ, who heard the DRAM suit ruled against Tessera saying that the company's patents are not infringed by the respondents but maintained that the asserted patents are valid.
After a full review of the ALJ's decision, termed an "Initial Determination," the ITC commission, which agreed with the ALJ's conclusion, determined that the methodology used by Tessera's expert was insufficient to prove infringement by the respondents of two of the asserted patents. As to the third patent, the ITC has indicated that infringement was proven as to some but not all of the accused products, but that, due to patent exhaustion, there was no violation of Section 337. (Section 337 cases involve specialized issues of patent law).
Tessera has appealed the ITC ruling. The Notice of Appeal was filed Thursday. (January 28).
Last May, the ITC ruled in favor of Tessera in a lawsuit related to chip-packaging patents against Qualcomm, Motorola, Spansion, STMicroelectronics, Freescale Semiconductor and AMD.
Following the ITC ruling, Motorola entered into license agreement with Tessera, settling all outstanding litigation between the companies. Under the worldwide license, Motorola will pay royalties on shipments of certain electronic products including cell phones, set-top boxes, and radio equipment that incorporate unlicensed chips that use Tessera's patented TCC technology.
Henry Nothhaft, chairman and CEO of Tessera who remains optimistic of the company said, "We signed six new licensees in 2009, two in Micro-electronics and four in Imaging & Optics. This expanded customer base is one key growth driver for us in 2010. Our growth will also come from the expected recovery in our served markets - DRAM, Wireless, Semiconductor Capital Equipment, and Consumer Optics."
TSRA closed Thursday's trading at $18.93, up 1.18% on a volume of 1.87 million shares. In after-hours, the stock was down 2.64% to $18.43.
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