Why Finisar, InterDigital, and GNC Holdings Tumbled Today

Friday gave stock market investors some respite from losses earlier in the week, as major-market benchmarks managed to recover by around a quarter of a percent. Merger and acquisition activity helped bolster stocks in many different parts of the market, but concerns about the sustainability of the economic recovery held others back. Finisar (NASDAQ: FNSR  ) , InterDigital (NASDAQ: IDCC  ) , and GNC Holdings (NYSE: GNC  ) were among the worst performers of the day.

Source: Finisar.

Finisar plummeted 22% after the maker of fiber-optic network components reported subpar fiscal fourth-quarter results, and gave gloomy guidance for the current quarter, as well. Even though sales jumped by more than a quarter, a plunge of more than four full percentage points in gross margin weighed on overall profitability. Finisar remains upbeat about its achievements, with hopes to keep its market share rising, and to make the most of an upsurge in capital spending among telecom-company customers. The question is whether shareholders will be willing to turn what had been a growth-stock play into a value proposition now that shares have been beaten down so far.

InterDigital lost 7% after a judge ruled that Nokia (NYSE: NOK  ) and China's ZTE had not infringed on wireless-transmission technology patented by InterDigital. InterDigital CEO William Merritt issued a statement after the decision, disagreeing with the decision, but suggesting that an appeal to federal appellate court might yield a better result in the long run. InterDigital has generally been successful in getting many companies to license its technology, with an agreement last week with Samsung having led InterDigital to revise its second-quarter revenue guidance upward. Still, with the stock trading at lofty heights, InterDigital needs all the revenue it can get to justify its valuation.

Source: GNC.

GNC Holdings fell 6% in the wake of the resignation of its chief financial officer. Michael Nuzzo will take a job at a private company in the consumer-products industry, giving about five weeks' notice in order to help GNC meet its obligations to report its second-quarter financials. GNC stock has been under pressure all year, with the company's first-quarter results showing disappointingly slow growth of just 0.7% in same-store sales. Falling gross margins accompanied weather-related impacts, but increased competition from nutritional-product selling rivals has also weighed on investor sentiment. Until GNC finds a way to distinguish itself, it could be tough for its stock to get back on track.

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  • Report this Comment On June 17, 2014, at 11:46 AM, DZPM wrote:

    No wonder IDCC dropping $6 in a day because stock is pumped up by speculators attending seminars doesn't make stock more valuable Earning das losing patent dispute das Watch for another drop off $6 for IDCC in one day

  • Report this Comment On November 09, 2014, at 10:02 PM, douglasmalden wrote:

    Insider Trading Alert - IDCC Traded By Insiders

    Kritzmacher John A, who is Director at InterDigital, sold 2,000 shares at $49.38 on Nov. 3, 2014. Following this transaction, the Director owned 10,388 shares meaning that the stake was reduced by 16.15% with the 2,000-share transaction.

    The shares most recently traded at $50.08, up $0.70, or 1.4% since the insider transaction. Historical insider transactions for InterDigital go as follows:

    4-Week # shares sold: 2,000

    12-Week # shares sold: 2,000

    24-Week # shares sold: 15,057

    IDCC Equity Summary Score Bearish 2.6 > Jefferson Research – Sell / Thomson Reuters/Verus – Sell

    Columbine Capital Services Inc. – Underperform

    In the wake of several changes in U.S. law, which make it easier to challenge software patents, patent prices are plummeting, the number of court fights is down, and stock prices of many patent-holding companies have fallen. Some tech firms say they are punching up research budgets as legal costs shrink, while support for major patent reform is under fire as trolls get trounced.

    "Their entire business model relies on intimidation, and that has lost its edge," said Efrat Kasznik, president of intellectual property consulting firm Foresight Valuation Group. "If the patents are not enforceable in court anymore... the troll has no legs to stand on."

    Brokers who work with the patent acquisition companies acknowledge the new climate.

    "In some cases, there are just no current buyers for these patents at all," said Robert Aronoff, founder of the patent brokerage Pluritas, citing new legal standards for the change.

    NetApp, a Silicon Valley maker of sophisticated data storage devices, last month used a new legal precedent to force a patent holder to pay its legal fees. The judge called the case "reckless and wasteful." IDCC is nothing but a Sell.

    IDCC is short sale candidate.

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Dan Caplinger

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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