Tessera Technologies, Inc. (NASDAQ:TSRA)

Alex1963 (29.65) Submitted: 6/4/2009 3:11:37 PM : Start Price: $13.89 TSRA Score: -14.87

Analyst Note 06-03-2009
CSP technology allows chipmakers to reduce the size of the packaging around its chips. Tessera licenses out its CSP technology to large chipmakers like Intel INTC and collects royalties based upon units shipped. The company's CSP technology is used in the production of 80% of all dynamic random-access memory chips and 35% of all wireless chips. Firms use CSP in order to produce smaller chips that allow manufacturers to shrink the size of its electronic devices, such as cell phones, yet offer greater functionality. We believe this trend toward miniaturization will continue, particularly as devices like smartphones become more powerful and popular.
essera aims to license its chip package miniaturization IP, as well as vigorously enforce its patents against firms that use its technology without paying royalties. The company has several outstanding litigation cases against a host of chipmakers but has achieved settlements with other firms for back royalties on the company's IP. However, some key company patents will expire in 2010. Tessera's response to patent expirations is to develop new CSP patents that can generate future license revenue and to create long-term growth from its optics business.
Tessera has a strong balance sheet, with more than $350 million in cash and equivalents and no debt as of March 2009. We are not concerned about Tessera's ability to meet its financial obligations
FINANCIAL HIGHLIGHTS   
Fiscal Year
Fiscal Year Ends:   31-Dec
Most Recent Quarter (mrq):   31-Mar-09
Profitability
Profit Margin (ttm):   13.80%
Operating Margin (ttm):   49.82%
Management Effectiveness
Return on Assets (ttm):   18.34%
Return on Equity (ttm):   9.18%
Income Statement
Revenue (ttm):   303.52M
Revenue Per Share (ttm):   6.328
Qtrly Revenue Growth (yoy):   93.00%
Gross Profit (ttm):   231.55M
EBITDA (ttm):   170.72M
Net Income Avl to Common (ttm):   41.88M
Diluted EPS (ttm):   0.87
Qtrly Earnings Growth (yoy):   1673.10%
Balance Sheet
Total Cash (mrq):   361.26M
Total Cash Per Share (mrq):   7.429
Total Debt (mrq):   0
Total Debt/Equity (mrq):   N/A
Current Ratio (mrq):   5.635
Book Value Per Share (mrq):   10.199
Cash Flow Statement
Operating Cash Flow (ttm):   144.73M
Levered Free Cash Flow (ttm):   147.19M
On the heels of its recent International Trade Commission litigation win, Tessera Technologies TSRA announced that it entered into a licensing agreement with Motorola MOT that settles all outstanding litigation between the companies. As part of the deal, Motorola will pay Tessera an up-front license fee, as well as future royalties based on the volume of Motorola's product sales, such as radios and set-top boxes, which use chips that rely on Tessera's chip-scale packaging technology. The deal comes as no surprise, as Tessera previously announced that Motorola had an option to enter into this type of agreement.

Tessera raised its second-quarter outlook and now expects revenue of $59 million-$61 million for the quarter, up from the prior estimated range of $46 million-$49 million. The company did not specifically state the up-front license revenue associated with the Motorola deal, but it credits the deal as a key driver for the updated outlook, and it is likely that the up-front fee is responsible for the majority of the increased guidance. We are raising our fair value estimate to reflect the up-front fee as well as an increase our estimated back-payment revenue under the expectation that other wireless defendants will enter into similar agreements.
Stock Price History
Beta:   1.26
52-Week Change3:   34.14%
S&P500 52-Week Change3:   -32.34%
52-Week High (03-Jun-09)3:   27.28
52-Week Low (05-Dec-08)3:   8.33
50-Day Moving Average3:   16.93
200-Day Moving Average3:   13.38
Share Statistics
Average Volume (3 month)3:   907,705
Average Volume (10 day)3:   2,154,970
Shares Outstanding5:   48.63M
Float:   47.20M
% Held by Insiders1:   2.01%
% Held by Institutions1:   95.00%
Shares Short (as of 12-May-09)3:   1.77M
Short Ratio (as of 12-May-09)3:   2.1
Short % of Float (as of 12-May-09)3:   3.70%
Shares Short (prior month)3:   1.40M