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Unwired Planet Acquires Patents From Ericsson

|Includes: CMCSA, ERIC, Great Elm Capital Group, Inc. (GEC), SAP

Some investors shy away from making investments in the technology sector. A lot of the stocks are undervalued, and the inexperienced investor ignores them. But some of the overlooked companies are fast growing, boasting of high profile partners and clients in every major industry in the United States. Many of them are the creative genius behind the innovations in the tech field, offering numerous possibilities for the informed investor. With this at the back of my mind, I took a look at one play in the tech sector that I believe merits a place on my watch list.

Unwired Planet Inc. (NASDAQ: UPIP) is a patent licensing company that was once called Openwave. Its patents have enabled mobile browsing, mobile photo-messaging, and the world's first Wireless Access Protocol (WAP) deployment. This overlooked gem has a patent portfolio of about 200 products and has 75 pending applications. The company's patents are seen to be crucial to smart devices, cloud technologies, and unified messaging. The firm boasts a list of high profile patent users such as AT&T Inc. (NYSE: T), Comcast Corporation NASDAQ: CMCSA), and many others. It has also announced a deal to acquire a portfolio of 2,185 patents pending from Ericsson (NASDAQ: ERIC).

On a GAAP basis, net loss for the second fiscal quarter ended December 31, 2012 was $11.6 million. This might seem discouraging, but it is not so when compared with a net loss of $15.1 million in the prior quarter. The reason for the improvement is because the company has transformed into an intellectual property firm. It commenced enforcement actions on its patents and streamlined its corporate structure.

"Unwired Planet is poised to deliver on its IP model," said Mike Mulica, Chief Executive Officer of Unwired Planet. "This quarter we have also made additions to our Board of Directors, which we believe will further strengthen the Company as we seek to accelerate the pace on execution on our long-term strategy and monetize the company's significant assets."

UPIP's 2013 second fiscal quarter result should not discourage investors from this stock. It could be a lean quarter, which is normal. On a GAAP basis, net income for the fourth fiscal quarter ended June 30, 2012 was $31.9 million, compared with a net loss of $9.5 million in the prior quarter and net loss of $20.0 million in the June quarter in the preceding year. Net income on a GAAP basis for the year was $14.6 million. With Ericsson agreeing to transfer 1,922 patents and 263 patent applications to Unwired Planet in return for a share in ongoing revenue from the patents, long term profit might just be around the corner.

Unwired Planet has a market cap of $179.74 million, sells at $1.99 per share, and may be undervalued at that price. If this is true, its valuation may increase. Sure its rivals such as Microsoft (NASDAQ: MSFT), Oracle (NASDAQ: ORCL), and SAP AG (NYSE: SAP) are bigger and carry more clout, but no one should ignore Unwired Planet. Investing is a tricky business, and one cannot be sure about anything. I'll put Unwired Planet on my watch list and await the result of its transformation.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.