Wi-LAN poised to resume double-digit growth, says Byron's Astle

Byron Capital analyst Tom Astle says that while litigation costs are climbing at Wi-LAN, this normally precedes revenue growth.

Byron Capital analyst Tom Astle says that while litigation costs are climbing at Wi-LAN, such expenses normally precede revenue growth.

Yesterday, Wi-LAN (TSX:WIN) reported its Q1, 2012 results. Revenue of $24.7-million compared favourably with the $26.3-million the company posted in the same period last year. And, backing out $31.1-million in expenses related to the company’s 6 per cent extendible convertible unsecured subordinated debenture financing, the company earned $.13 cents a share, up from nine cents last year.

Byron Capital analyst Tom Astle says the quarter bested his expectations. Astle says that while 2012 seems to be a period in which Wi-LAN’s growth takes a breather from the dizzying gains of recent years, there are real reasons to believe the Ottawa patent player could post for 25% – 30% growth in 2013. In a research update to clients yesterday, Astle maintained his BUY rating and $7 target on Wi-LAN.

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Wi-LAN, which founded in Ottawa in 1992, developed a range of communications and consumer electronics products including routers, 3G handsets and WiMAX base stations. The Company now has more than three-thousand patents, and has already licensed their technologies to blue chip techs such as Cisco, Nokia, Panasonic, Samsung. Wi-LAN sprung to life after MOSAID employee Jim Skippen was unsuccessful in convincing his employer to become a pure patent play, and left for Wi-LAN, from whom he was negotiating the purchase of patents. The company is now no stranger to patent infringement claims, having launched actions against dozens of multinationals, including Apple, Hewlett-Packard, Intel, Sony and Toshiba. Under Skippen’s watch, the company’s revenue has climbed from just over $2 million in fiscal 2006, to the more than $100 million in fiscal 2011. Wi-LAN has quietly become one of the world’s top patent acquirers, on par or better than Apple, Google and Samsung in the third quarter of 2011.

Astle says that while the quarter revealed litigation costs are climbing at Wi-LAN, he sees this as a positive because he believes such expenses normally precede revenue growth. The Byron analyst is also encouraged by activity at Gladios IP, the division Wi-LAN created recently that works with other companies to try and unlock the value of their patents. Gladios has already signed seven partners and is in discussion with thirty more, says Astle.

At press time, shares of Wi-LAN were down 1% to $4.90.

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