What's up at Certicom?
News out this morning that Certicom (CIC:TSX) has parted ways with its CEO. Now, given the success that Wi-LAN (WIN:TSX) has had with its patent portfolio (stock is up 6x in a couple of years) under that firm’s new leadership, it may not come as a surprise that CIC had to make a change.
What is a surprise is that the very press release describing the CEO departure also mentioned the engagement of two patent law firms and the desire to “vigorously defend our patent portfolio”:
The Company also announced that it has retained the Fish & Neave Intellectual Property Group of U.S.-based law firm Ropes & Gray and Kasowitz Benson Torres & Friedman LLC, also U.S.-based, to advise the Company in these matters.
Odd, isn’t it, to refer to such actions in the same release as one discussing a CEO departure.
Unless, perhaps, it is relevant to the story. Hopefully one of the research analysts will delve into that this am on the call.
Any updates on this? CIC:TSX has steadily been dropping in value these last few months
When the CEO was pushed out in favour of a more aggressive patent strategy, I think the market said: let’s wait and see what’s to come. There was a single, large (close to 1MM shares) block trade about 10 or 12 days ago that looked like an “exit”. So, the good news is that if a large shareholder wants to move on, the dealers can place the stock. The bad news is that buyer doesn’t need to acquire stock “on the board”, which normally can be relied upon to move the stock up.
CIC trades at a high multiple of revenue and needs to demostrate that it can convert a valuable patent portfolio into more than $3 million or $4 million of revenue each quarter. All on the backs of 2 key sales people and one telegenic founder.
Top line growth is required just to sustain the stock, although patent licencing wins will help as they did with Mosaid and Wi-LAN. But in those two cases, they weren’t trading at the same lofty rev multiples, either.
The last few days I’ve taken to reading the spirited discussion on Stockhouse’s CIC “bullboard” about Certicom’s recent big moves: sacking their CEO, and their enlistment of two different groups of American heavyweight-division intellectual property management and defense experts. (Be sure to read the extraordinarily witty and insightful posts by “protectmytech”. He/she thinks these two big events will turn the company around in a big way.)
I’d like to comment briefly on statements made in the above Apr 2 and Apr 17 commentaries:
From the first, this quote: “What is a surprise is that the very press release describing the CEO departure also mentioned the engagement of two patent law firms and the desire to ‘vigorously defend our patent portfolio’”.
My comment: these moves were made and announced simultaneously for good reason. The Board of Directors obviously wanted to state as emphatically as possible that:
A) They’d had enough of the timid steering by CEO McKinnon, a person so lacking in advanced business skills that he seemed to fairly beam, while pumping the hands, at every annual Certicom-hosted industry get-together, of the growing number of business chiefs who lined up to pat his shoulder and express their admiration of his philosophy that ECC deserves (its inanimate self, I guess) to be an open, shared, mutually enriching technology. (The dialogue, of course, wasn’t so obvious, just what this witness sensed clearly.) And:
B) That with ECC’s time having arrived, nobody’s going to regard any Certicom employee as smile-and-shoulder-pat material ever again. It’s time we played hardball like the rest do, and we’re about ready. These are our bats (the lawyers). Take notice, everyone: we’re coming out swinging.
Then from the second letter: “…patent licencing wins will help as they did with Mosaid and Wi-LAN. But in those two cases, they weren’t trading at the same lofty rev multiples, either.”
My comment: Mosaid and Wi-Lan own diddly-squat compared to what Certicom owns. “Lofty rev multiples.” Instead, you might try to roughly figure a “Property to Market Cap” multiple, which I’d say is horrifyingly high. Horrifying, that is, unless you’re putting together an offer for the company.