NeoMagic Corp. (NMGC)

F3Q08 Earnings Call

December 6, 2007 5:00 pm ET

ARM Holdings (ARMHY)
Rambus (RMBS)
Acacia Technology (ACTG)
Burst.com (BRST.PK)
Forgent Networks (FORG)
Neomagic Corp. (NMGC)
Patriot Scientific (PTSC.OB)
Star Scientific (STSI)
...and many others

The Microcap Speculator submits: Mobile video is hot, and is expected to explode over the next 12-18 months. For the past month I have considered ways to play this trend, focusing mainly on licensors of wireless video streaming technology like On2 Technologies (ticker: ONT) and NeoMagic Corp. (ticker: NMGC), as well as communications chip companies.

Perhaps I was looking in the wrong place. Rather than bet on competing technologies, why not pursue the one industry that emerges a winner with every technological advance? That's right: pornography. Cable TV, satellite, VCR's, internet, broadband, you name it, the porn industry excels at using technology to separate perverts from their money. Porn operators now have their sights set on mobile video and if history is any guide they will be wildly successful.

The Microcap Speculator submits: The IP licensing business is a couch potato's dream: buy or develop a bit of intellectual property, negotiate a few licenses, sue those who refuse to pony up, and watch the royalty checks come in.

Of course, its not nearly that easy. IP litigation is extremely expensive. The initial trials generally cost seven figures and are usually appealed. And its not just the legal fees. Each lawsuit runs the risk that the underlying patent could be invalidated.