UPDATE: WiLAN targets acquisitions with large cash balance

Elizabeth Howell
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Wi-LAN Inc.'s (TSX:WIN) strong balance sheet has whetted the company's appetite for acquisitions in the coming quarters, says chief executive Jim Skippen.

WiLAN CEO Jim Skippen (File photo)

The Ottawa patent licensing firm, despite higher-than-expected litigation costs this quarter, beat its target for fiscal 2010 with preliminary results showing revenues of C$50.7 million.

WiLan expects revenues to more than double in fiscal 2011, to up to US$115 million.

It now has around $75 million in cash set aside, something Mr. Skippen says was always a strategy of his as the large sum of money means the 45-person firm won't be easily out-muscled when competing against larger firms.

He was coy on what companies are acquisition targets, save for denying that fellow Ottawa patent licensing firm MOSAID Inc. is a possibility.

"We really believe that bigger is better in this business, and we’ve seen all sorts of smaller players running into trouble," Mr. Skippen said in a conference call with analysts on Thursday.

"When we were still a small player, it was in our DNA to become bigger and stronger. We felt that was the best way to succeed, ultimately."

Through acquisitions, royalties in association with patent-dispute settlements and consulting to smaller companies looking to protect their intellectual property, Mr. Skippen said he is targeting 20 per cent to 30 per cent revenue growth annually to reach more than $200 million in revenues by 2015.

In the past few weeks, WiLAN was preparing for a major wireless trial against defendants that included Apple, Dell, D-Link Systems, Hewlett Packard Co., Intel, Sony Electronics Inc. and others.

However, a technicality in the trial delayed it by a month and in the intervening time, WiLAN came to settlements before the trial's Feb. 2 date.

More legal disputes are coming to court in the next few months, providing WiLAN with "lots of action" for the forseeable future, Mr. Skippen said.

The company is in dispute with Apple, Sony and Toshiba over Bluetooth technology, LG Electronics concerning the V-chip, HTC Corp. and Exedea Inc. concerning handsets, and Alcatel-Lucent, Sony Ericsson and Ericsson concerning base stations, among other lawsuits.

WiLAN said "higher than forecasted" litigation costs had pulled fiscal expenses up to $46.4 million, some $2 million to $5 million more than expected.

But at least one analyst pointed out their avoidance of the wireless trial had put the company in a stronger position for future quarters.

With the Feb. 2 trial cancelled, the company achieved a desirable outcome for its shareholders without risking its patents or potential negative outcome in court, thus stemming a high cash burn on litigaation expenses," read a research note from Fraser Mackenzie.

"Litigation by definition is risky, especially in this case; a relatively unknown company was simultaneously taking on several giants of the wireless industry, few of which like Intel and Broadcom have been known fo their tenacity and litigation profiles."

Still, revenues were well above the patent licensing firm's previous guidance of $46 million to $48 million. Earnings stood at $5 million, meeting WiLAN's forecast of $5 million to $7 million. 

In 2011, when all figures will be reported in U.S. dollars, revenues are expected to reach US$110 million to $115 million, expenses $33 million to $38 million, and adjusted earnings between $75 million and $80 million.

In recent weeks, WiLAN completed a $75 million share offering, and closed $21.8 million in bought-deal financing.

Its stock price has hovered around $6 since mid-December, the highest threshold reached since 2007.

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