Is Vringo Worth The Gamble?
Dr. Osman is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Vringo : VRNG) is a mobile software developer and intellectual-property firm. The company was started in 2006 by entrepreneur Jonathan Medved and mobile software specialist David Goldfarb. In July 2012, it merged with Innovate/Protect, Inc. The company's VringForward technology enables users to share video ringtones on the Vringo video-sharing platform. Furthermore, its current patent portfolio consists of 31 patents and applications, 11 of which have already been granted. These patents include search and mobile technologies over which the company has rights. Vringo owns eight patents acquired from the Internet search company Lycos Inc. The company is known for its Facetones and Video Ringtones applications, which integrate calls with video. Among the best-known mobile platforms, Vringo is present on both Android and Apple iOS, which constitute the majority of the smartphone market.
Recently, it has become somewhat of a trend for relatively small companies to sue market giants for patent infringement. AOL (NYSE: AOL), ZTE, and Google ) are among the companies sued by Vringo. Ringtones are a $6 billion market. Vringo’s main business operations are a matter of perspective; while the company claims its primary business to be mobile ring tones, its revenues were only $206,000 in the first half of 2012. During the same period however, the company raised an additional $45 million in stock, strengthening the company's financial position for patent infringement claim court battles. So, Vringo seems to be prioritizing its potential damages over software development. In its tussle with Google, Vringo was given a boost when Google lost its motion for a summary judgment, and its stock rose by 70% on October 3. On Monday, October 15, the company’s stock surged a further 20% as it sued ZTE.
In the short term, Vringo seems to be a purely speculative stock whose investors will exit the doors as quickly as they entered. Short-term investment seems to be in order, but the stock is extremely risky as predicting the verdict of jury in a case involving Google is notoriously difficult. It must be remembered, though, that Vringo’s claim does indeed have substance, which is why the court proceedings have reached this stage. It is certain that Vringo is not a company suited to long term-investors and instead more of a gamble. The odds of Google wanting a settlement are a lot higher now than before, but the San Francisco giant is not known for bowing down to patent threats. The chances of the company embroiling Vringo in a court battle resulting in losses are also significant.
Vringo stock is being fueled entirely by positive sentiments for court decisions that are likely to favor the company. Vringo's law suit file against Google has been the primary fuel for the stock. Vringo made a brilliant decision to use the patents acquired from Lycos to charge Google with intellectual property infringement. I think the legal case will end up in a peaceful agreement.
Google does not want to go to trial. The software giant wants to avoid the $1 billion plus claims. I believe that there will be a settlement, a compromise between what Google would be willing to pay and what Vringo would be willing to accept against future royalties. Vringo’s stock will gain, and Google will continue to take advantage of the allegedly infringed patents.
ecofinstat has no positions in the stocks mentioned above. The Motley Fool owns shares of Google. Motley Fool newsletter services recommend Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.