For a long time, RPX (RPXC) specialized in helping companies engage in risk management related to potential patent litigation, putting together a portfolio of intellectual property to give its clients protection against possible lawsuits. Later, RPX responded to tepid performance in that market to offer services related to the discovery process in legal battles. Even with those multiple efforts, RPX hasn't managed to produce the growth many had hoped to see.

Coming into Wednesday's fourth-quarter earnings report, RPX investors expected another quarter of relatively flat performance, but they weren't prepared to see what the company decided to do. RPX's results included some substantial charges, but the announcement that it will seek strategic alternatives could spell a new chapter in its history. Let's look more closely at RPX and what its latest announcements say about its future.

Wood-paneled courtroom with view of front as seen from far end of jury box.

Image source: Getty Images.

What prompted RPX's decision?

RPX's fourth-quarter results were mixed. Revenue was flat at $81.8 million, which was actually better than the slight decline most investors were expecting to see from the company. Massive impairment losses caused the company to post a net loss of $95.7 million, or $1.93 per share. Yet when you take out the impact of extraordinary items, adjusted earnings of $0.22 per share were well above the $0.12 per share consensus forecast among those following the stock.

One-time items dominated the income statement. The company took a charge of $94 million, which came largely from goodwill writedowns from its discovery business. Income tax-related adjustments also cost RPX about $5.5 million on its bottom line.

As we've seen several times before, RPX got its revenue gains mostly from the discovery side of the business. That segment enjoyed an 11% rise in its top line, and fee-related revenue more than doubled from year-earlier figures. Yet the patent-related subscription revenue that RPX brought in fell 5% from year-earlier levels, essentially wiping out the gains elsewhere.

Spending on patents climbed back to more normal levels, with 16 patent transactions accounting for net spending of $51.4 million. Even with the end-of-year flurry of activity, though, RPX spent less on patent-related acquisitions in 2017 overall than it did in 2016.

CEO Marty Roberts explained the company's philosophy. "As the patent market continues to evolve," Roberts said, "RPX is changing along with it to ensure we remain a key advisor to our clients on their patent strategy." The CEO said RPX is also looking at continuing ways to serve its clients more broadly.

What will RPX find?

Perhaps the most interesting news came from RPX's announcement that it will explore and evaluate strategic alternatives to maximize shareholder value. Board Chair Shelby Bonnie said that in light of the company's efforts to streamline its cost structure and retool its management organization to make the most of its opportunities, now was a good time to look at how it might serve its investors best. RPX made it clear that investors shouldn't anticipate any particular result coming from the process.

RPX's guidance for 2018 was somewhat concerning. Using new accounting standards, the company now expects revenue of between $232 million and $266 million, with adjusted net income of $18 million to $28 million. That will work out to earnings of roughly $0.36 to $0.56 per share on an adjusted basis, and both that and the sales figures are well below what those following the stock had anticipated seeing.

At this point, RPX investors appear to be counting on the company finding a viable exit strategy to maximize shareholder value. If strategic exploration doesn't result in a buyout or other transformative transaction, then shareholders will have to hope RPX can make more progress toward finding ways to grow its business organically.