Samsung deal validates Wi-LAN’s business strategy, says Stifel Nicolaus’s Abernethy

Stifel Nicolaus analyst Blair Abernethy says yesterday’s announcement that Samsung had agreed to an early renewal and expansion of its existing license agreement with Wi-LAN (Wi-LAN Stock Quote, Chart, News: TSX:WIN) gives him more “clarity and confidence” in the company.

Wi-LAN made the announcement yesterday, but did not provide details of the arrangement, which is an extension of a 2009 agreement. Management said it gives Samsung a license to patents for wireless mobile products but extends the scope and term of the deal.

Abernethy says Wi-LAN’s strategy of signing long term licenses is a non-litigious way is further validated by yesterday’s announcement, and he is intrigued by the the hint of further collaboration in the press release, noting that Samsung recently invested $25 million to launch Washington-based Intellectual Keystone Technology to strengthen its patent business.

Wi-LAN has a total of six trials scheduled in the second half of 2013, including actions against Hon Hai, Alcatel-Lucent, Apple, Ericson and HTC. Late last month, shares of the company spiked 8% after signing a license agreement that settled patent litigation with Dell.

In a research update to clients today, Abernethy maintained his BUY rating and $6 one-year target price on Wi-LAN.

Abernethy says he expects Wi-LAN will generate EBITDA of $7.5-million on revenue of $81.7-million in fiscal 2013. He expects 35% topline growth the following year, to $110.3-million, and he expects the company’s EBITDA will rise sharply, to $59.9-million.

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