Acacia plans to invest up to $200 million to purchase patents for its own account. Several large corporations have approached the company either to represent them in pursuing infringers of their technology, or to take non-core patents off their hands for cash. Last year Acacia formed a hedge fund to invest directly in patents. That operation is designed to employ capital supplied by outside investors, augmented by a small amount of Acacia's own money. The new investment program will be conducted outside the fund. Partners might be lined up for particular patent acquisitions. But most of the action will be for the company's own account.
Two more large "structured" deals are likely to be completed in 2011. Those transactions could be similar in size to the Samsung transaction, perhaps higher if Acacia can bring more intellectual property into its portfolio before the deals are signed. We are raising our 2011 revenue estimate by 7.5% to $215 million to reflect the accelerating deal momentum. Our non-GAAP earnings estimate (see "Accounting Notes") is unchanged at $1.15 a share due to the uncertain royalty rate outlook.
Growth could remain explosive in 2012. Acacia hopes to consummate four structured transactions next year. The volume of regular business promises to keep expanding. And the payoff from the company's direct patent investments could yield further leverage. Non-GAAP share earnings have the potential to advance into the $1.50-$1.75 range. Growth could be maintained at above average levels beyond as Acacia reinvests its burgeoning cash flow at superior rates of return.
( Click on Table to Enlarge )