BUSINESS
11/09/2011 03:50 EST | Updated 01/09/2012 05:12 EST

Wi-LAN posts $7.3M profit in the third quarter; revenues increase

OTTAWA - Wi-LAN Inc. (TSX:WIN) may surprise investors with some of the patent portfolios and companies it is looking at acquiring following its failed attempt to takeover Mosaid Technologies, the company's chief executive says.

"When I look at the acquisitions that we're looking at that I'm most excited about, they're in areas that I think are going to surprise the market when we announce them," Jim Skippen said Wednesday.

"They aren't things that people are thinking about it."

Skippen made the comments as the patent licensing company, which keeps its books in U.S. dollars, reported a third-quarter profit of US$7.3 million or six cents per share on $27.8 million in revenue. That compared with a loss of $6 million, or six cents per share, on $10.8 million in revenue a year earlier.

On an adjusted basis, earnings were $22.8 million, or 18 cents per share, which put it in line with analyst expectations and up from a profit of $903,000, or a penny per share in the prior-year period.

The company attributed the stronger results to lower litigation and operating expenses.

Analysts on average had expected Wi-LAN to report an adjusted profit of 18 cents per share on $29 million in revenue, according to figures compiled by Thomson Reuters.

Cloud computing, medical patents and car technology were all areas Skippen mentioned as possibilities for Wi-LAN, which has been focused on wireless and V-Chip technologies.

"We are actually happy when we look at completely new areas because it is sort of virgin territory for us, so I think you're going to see some technologies in completely different areas as this thing unfolds," he said.

Wi-LAN primarily collects licensing fees from companies that use technologies covered by its portfolio of patents.

During the most recent quarter the company more than doubled its quarterly revenue as it reached licensing agreements with several major companies that also resulted in the dismissal of four lawsuits.

However the company lowered its financial guidance for the year.

Wi-LAN said it expected revenue for 2011 to be in the rage of $105 million to $110 million, down from earlier guidance of $110 to $115 million.

Adjusted earnings are now expected to be in the range of $70 million to $75 million, down from $75 million to $80 million.

Wi-LAN shares closed down 63 cents at C$6.76 on the Toronto Stock Exchange on Wednesday.

Investment firm Versant Partners said the lower guidance was a disappointment, but still rated Wi-LAN a "buy" with an $8.40 price target.

Versant analyst Justin Kew noted that Wi-LAN trades at a "significant discount" to its peers.

"We think that this discount is not warranted. In addition, we expect the market will have a greater appetite for Wi-LAN stock once the Mosaid transaction closes," Kew wrote in a note to clients.

Wi-LAN walked away from its hostile takeover offer for Mosaid Technologies Inc. last week in the face of a richer friendly bid by a U.S. private equity firm.

The company bid $531 million or $42 per share for the rival Ottawa-based technology patent company, but it fell short of the $590 million or $46 per share offer from by U.S. private equity firm Sterling Partners.

However, Wi-LAN said last week that it wouldn't be walking away completely empty-handed. It expects to sell the Mosaid shares it currently owns to Sterling for a gain of $3.6-million to help offset some of the costs associated with its takeover bid.