June 11, 2010 / 4:06 PM / 8 years ago

Mosaid shares surge on strong results, forecast

* Bigger than forecast Q4 profit, revenue

* Announces suit against LSI

* Stock climbs 7.7 pct to C$21.11 on TSX

OTTAWA, June 11 (Reuters) - Mosaid Technologies Inc MSD.TO shares rose 7.7 percent on Friday after the high-tech patent licensing company reported quarterly profit and sales that beat analyst forecasts.

The Ottawa-based company, the third-biggest net gainer on the Toronto Stock Exchange on Friday morning, also issued a first-quarter forecast that topped analyst estimates. Its shares added C$1.51 to C$21.11.

Mosaid said after markets on Thursday that it earned C$8.1 million ($7.8 million), or 69 Canadian cents a share, in the fourth quarter, on revenue of C$19.9 million.

That bested the average analyst forecast for a profit of 54 Canadian cents a share and revenue of C$17.6 million, according to Thomson Reuters I/B/E/S.

“Mosaid delivered a strong Q4 driven by higher than expected revenues, but lower than expected patent licensing and litigation expense,” BMO Capital Markets analyst Brian Piccioni said. “Q1 guidance also looks good.”

The company said it sees first-quarter net income of C$6.3 million to C$7 million, or 53 to 59 Canadian cents a share, and revenue of C$17.5 million to C$18.5 million.

Analysts had expected earnings of 54 Canadian cents and revenue of C$16.8 million.

Piccioni said the quarter also had negative news, including a contract dispute with LSI, slow progress with its IBM litigation and a forecast for higher patent licensing and litigation costs.

He cut his stock target to C$28 from C$30 but maintained his “outperform” rating.

Mosaid said on Thursday it has served LSI Corp (LSI.N) and Agere Systems with a breach of contract suit, initially filed in March. The suit alleges breach of certain warranty and contract provisions under Mosaid’s February 2007 US$70 million patent purchase agreement with Agere, which was later acquired by LSI.

Northern Securities analyst Sameet Kanade said Mosaid has begun fiscal 2011 “on a strong footing, with about 65 percent of the top-line guidance in the bag, based primarily on fixed-payment type royalty contracts.”

The analyst lifted his stock target to C$29 from C$28 and maintained a “buy” recommendation.

“We ... would not be surprised to see a guidance increase during the next couple of quarters,” Kanade said in a note.

Mosaid, which spent about C$12.6 million to buy more patents in the fourth quarter, ended the period with 2,001 patents and applications, up from 1,709 at the same time last year.

“With more than C$100 million in cash reserves ... we expect the company to aggressively bid for patent portfolios, including part of the Nortel 4G patents, which are on the auction block,” Kanade wrote in a report.

Mosaid forecast fiscal 2011 net profit at C$27.8 million to C$29.3 million, or C$2.33 to C$2.45 per share, on revenue of C$77 million to C$80 million. Analysts, on average, expect a profit of C$2.55 per share on revenue of C$79.8 million.

$1=$1.04 Canadian Reporting by Susan Taylor; editing by Rob Wilson

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