We are increasing our (fully taxed) 2012 earnings estimate from $1.25 a share to $1.50 a share. Our revenue estimate also is going up, from $275 million to $325 million. Neither reflects any contribution from the acquisition Acacia currently is working on, which might generate more firepower than the Adaptix deal. The company completed a private placement in February to finance the acquisition. Our earnings estimate includes that dilution but none of the prospective upside.
The pace of patent acquisitions is accelerating. Acacia pushed aggressively into the medical device area in 2011. Recent diversification efforts include automobiles and energy. In the past Acacia always was a little pressed for capital, so it insisted on 100% payments when infringers agreed to pay a license fee. Now that liquidity is higher the company is starting to arrange payment terms, spreading out income over a period of time. Acacia also is negotiating a higher percentage of deals without going to court. That promises to smooth out quarterly revenue, as well. Huge spikes are likely to persist, however. Amplifying that trend is the likely re-focus by the company on "structured deals." Acacia backed away from those arrangements last year as the intellectual property market took off. The company didn't want to lock itself into deals that undervalued the intellectual property involved. Now that valuations have stabilized a new round of structured deals could be in the cards.
We estimate earnings will keep rising at a fast pace in 2013. A larger patent portfolio combined with more out of court settlements, less competition, and more structured deals could propel (fully taxed) earnings to $2.25 a share. Above average growth could be sustained well into the decade.
( Click on Table to Enlarge )