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Jeff Parker

ParkerVision’s future may not have changed after court ruling

By Mark Basch, Contributing Writer

ParkerVision Inc.’s stock plunged last week after a federal court judge overturned a jury’s decision to award ParkerVision $173 million in damages in its patent infringement lawsuit against Qualcomm Inc.

But really, did U.S. District Judge Roy B. Dalton Jr.’s ruling actually change the outlook for Jacksonville-based ParkerVision? According to the one analyst who follows the company, maybe not.

“In reality, even if the judge had ruled in ParkerVision’s favor on infringement, the case would likely have still gone to the appellate court and investors would still be waiting on that process for the final outcome,” Ladenburg Thalmann analyst Jon Hickman wrote in a research note Tuesday, a day after ParkerVision’s stock dropped as much as 67 percent in response to Dalton’s decision.

Basically, if the judge had upheld the $173 million award, Qualcomm would have filed an appeal. So whatever the ruling, this case was ultimately going to be decided by a higher court anyway.

“In this regard, the future is not materially different than if ParkerVision had won outright,” Hickman said

ParkerVision didn’t waste any time, filing its appeal Wednesday to the U.S. Court of Appeals for the Federal Circuit. In announcing the appeal, CEO Jeff Parker also said it shouldn’t be a surprise to see the case going to a higher court.

“We always expected to find ourselves arguing this case at the appellate level, and our legal strategy reflects exactly that,” Parker said in a news release.

“As it is, ParkerVision is expected to be making the same argument to the appellate court that the jury verdict should be upheld and that it is due compensation for both past damages and ongoing product sales,” Hickman said.

Parker said the appeal process should take nine to 12 months.

Even if you’re a legal expert, it is difficult to figure out which side is right in the lawsuit which claims that Qualcomm is illegally using wireless technology patented by ParkerVision in its products. The technical details outlined in court filings are incredibly complex, and it’s hard to imagine how the judge, let alone the jurors, was able to sift through it.

Dalton’s ruling discredited the testimony of two of ParkerVision’s expert witnesses, but could the appellate judges see it differently?

Another issue hanging over ParkerVision’s future is a second lawsuit filed last month against Qualcomm and HTC Corp., a Qualcomm customer. The resolution of the first lawsuit doesn’t affect the second suit, which involves alleged infringement of a different set of patents.

Again, the technology is complicated but according to Hickman’s report, “these patents read on the functionality of the baseband processor which is a far more valuable component of a mobile device than is the receiver,” which is the focus of the first lawsuit.

Without understanding what that means, it is important to know that “because the baseband processor is a much more valuable component, the potential damages could be four to five times the damages that were awarded by the jury in the first suit,” Hickman said.

ParkerVision has staked a good part of its future on the outcome of these lawsuits as it still isn’t selling its technology to other manufacturers. That’s why ParkerVision’s stock fell as much as $3.80 to $1.21 last Monday after Dalton’s decision was revealed.

Hickman believes ParkerVision will still have a “favorable outcome” in the litigation and maintained his “buy” rating on the stock, but because of the increased uncertainty after Dalton’s ruling, he reduced his price target from $12.85 to $5.25.

“We believe that though we will likely have to wait out another year, the company will ultimately be successful and be granted the compensation it is owed for the use of its technology,” he said.

Google plans send Web.com stock down

What is the worst thing that could happen to an Internet-focused company like Web.com Group Inc.?

How about the possibility of having to compete with a behemoth like Google Inc.?

Google’s announcement last week that it is beta testing a domain name registration service sent Jacksonville-based Web.com’s stock down by $6.90 to $27.70 Tuesday, on fears that Google will take a big chunk out of Web.com’s business.

Web.com provides website development services for small and medium-sized businesses and domain name registration is a big part of its service. It became one of the biggest players in that market with its 2011 acquisition of Network Solutions.

Web.com’s domain business is expected to account for 46 percent of its revenue, which analysts project will reach about $600 million this year. However, analysts say domain registration is even more significant because it’s a business that brings in new customers who may buy other services from the company.

“Most of new subscriber additions start as domain-only customers and serve as a feeder for the higher priced value-added-services. This pipeline could potentially be disrupted if Google Domains is widely deployed,” B. Riley & Co. analyst Sameet Sinha said in a research note.

Sinha lowered his rating on Web.com from “buy” to “neutral” after Google’s announcement.

“To be fair, the (Google) beta has just been announced so there are various phases to go through before a full launch, but it creates an overhang on the stock that could depress valuations. While we await additional information on the service, we would prefer to move to the sidelines on Web.com,” he said.

Other analysts think the market overreacted to Google’s announcement and its potential impact on Web.com

“We see no near-term impact and likely moderate/manageable impact intermediate term. We expect Web.com to retain existing clients (1 percent churn) and thus continue to upsell into the existing base with ARPU (average revenue per user) the number one driver of growth for the company,” SunTrust Robinson Humphrey analyst Robert Peck said in a research note.

However, Peck does see an impact.

“Google’s entrance into domain registration is likely to be a headwind to other players. While we do not expect Google to poach existing customers, as business tends to be sticky with low churn, we do see a significant competitor for the incremental SMB (small and medium business clients), particularly for inbound leads,” he said.

Jenny Kobin, vice president of investor relations for Web.com, said by email that the company does not lose a lot of customers in the domain business.

“Our experience shows that once customers have a domain, given its relatively low price point, they tend not to hassle with switching just to save $10 or $20 per year,” she said.

Kobin also said Web.com is not overly concerned about competition from Google.

“There have been many low-priced competitors for years and we have competed effectively with a growing base of domain name customers,” she said.

Latitude 360 stock listing complete

Latitude 360 Inc. last week said its stock is now officially listed under the Latitude 360 name and is now trading under new ticker symbol “LATX” in the over-the-counter market.

Jacksonville-based Latitude 360 became a public company a month ago by merging with an existing public entity called Kingdom Koncrete Inc.

Latitude 360 operates restaurant and entertainment venues in Jacksonville, Pittsburgh and Indianapolis, and is planning a fourth venue in Albany, N.Y.

“Our completed merger, company name and stock symbol changes are all meaningful milestones for Latitude 360 as we continue building additional awareness both within the investment community and among the growing L360 customer base. We are at an exciting inflection point in our corporate evolution and the entire team remains focused on delivering operational excellence at our existing locations,” CEO Brent Brown said in a news release.

Michaels goes public again

The Michaels Companies Inc., operator of the Michaels arts and craft stores chain, went public again last week with an initial public offering of 27.8 million shares at $17 each.

The IPO price was at the low end of the company’s hoped-for range of $17 to $19 per share.

The Irving, Tex.-based company, which has a distribution center in Jacksonville, operates 1,145 Michaels stores and 118 Aaron Brothers stores.

Michaels was previously publicly traded before a $6 billion buyout in 2006 by private equity firms Blackstone Group LLC and Bain Capital LLC.

The company filed for an IPO in 2012 but called off those plans before refiling again in December 2013.

Blackstone and Bain still own about 40 percent each of Michaels’ stock after the IPO.

The company reported revenue of $1.05 billion and net income of $45 million in the first quarter ended May 3.

Its stock began trading Friday on Nasdaq under the ticker symbol “MIK.”

Jacksonville spinoffs prompt index changes

Speaking of new stock listings, two Jacksonville companies will complete their plans to spin off a second stock this week, and that prompted S&P Dow Jones Indices to announce changes to the S&P Midcap 400 index.

Rayonier Advanced Materials Inc. will be added to the index as the performance fibers business is spun off from Rayonier Inc. S&P Dow Jones also said that Rayonier Inc., which retains its forest resources and real estate businesses, will remain in the Midcap 400.

Meanwhile, Fidelity National Financial Inc. will be dropped from the Midcap 400 as it splits its current common stock into two tracking stocks. S&P Dow Jones said tracking stocks are not eligible for inclusion in its indices.

Fidelity’s stock will be split into FNF Group, which will include its core title insurance and other real estate-related businesses, and FNFV Group, which will include Fidelity’s investments into other types of businesses.

Trading in the two Fidelity tracking stocks is scheduled to begin Tuesday. Trading in Rayonier Advanced Materials is scheduled to begin today.

mbasch@baileypub.com

(904) 356-2466

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