Friday, March 28, 2008

A pregnant pause... entering Tessera with no available out for 3 days... (TSRA)

Tessera is a microelectronics company that holds a bunch of patents directly correlated to miniaturization technologies used in the semiconductor industry. They receive lots of royalties and licensing fees from Intel and other major semiconductor manufacturers.

Motorola has been trying to bitch slap the patent infringement suit Tessera has brought against them, which is kinda a big deal: If the patents are indeed not infringing, there's something to be said in a worst-case-scenario kinda way that they could be overthrown entirely and Tessera could lose their current clients. Bad news.

As a result of this fear, and several USPTO re-exams tossing claims, Tessera's share price completely tanked in February, from $40 to a low of $13 in seriously about a week. Ouch.

An ITC judge issues a stay against them, which killed them further. Tessera clarified that USPTO's claim-tossing was NOT the same as overturning their patents; quite different. This helped them out a bit. But yesterday, the ITC appeals panel unanimously overturned the stay and is allowing them to go forth with their claims. That caused a MASSIVE spike of 33% (+5.44 to $21.93) Friday alone.

Here's the thing: Tessera is a pretty stable company in terms of operation and IP. They have a bunch of major players paying major licensing fees to them for their technology. An analyst at Lehman Brothers is putting a price target of $46. From an intrinsic value standpoint, you're looking around the $40s at least, where it was trading for most of last year.

What's that mean? It's a steal at twice the price, even at $22. I'm going to put my liquid $1,000 into it @ market on Monday.

The only problem is that I free-rode Friday with Red Hat. (Bought in and then sold with unsettled funds.) If I do that twice, I have my account frozen for 90 days. This is why I need to sign my margin authorization. (Margin accounts aren't held to the free-ride stipulations. Even when you're trading in cash.)

So I'm effectively locked into this one for 3 days. But I think it'll be well worth it. I'm not sure how long I'll hold onto it. Any settlement or further upward movement in this court case could cause this stock to absolutely skyrocket. If they "win" in any form, we're talking a HUGE boost. It'll reaffirm their position beyond all doubt (as opposed to the unanimous overturn which simply helped them quite a bit) AND lock in a major cash influx. Huge potential here.

And if the ITC was overturning the stay unanimously, they clearly think there's some merit there. Not to mention the fact that Intel and a bunch of others are already paying the licensing fees without a peep. Some real potential here. Not sure what I want to establish as an exit strategy; if I want to hold medium or wait for a ruling on the case... if they failed to secure a victory on the case, all hell could break loose.

Either way, I'm seeing some decent short-ish term growth on the horizon. Maybe a jump on Monday, but having the free-ride limitation might actually help me out and not panic if it slips a little on Monday. (I fully expect it to go up though; there's going to be major support @ 22 and gnashing of short-covers.)

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3/29/2008 1:45 AMRegular

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