Little-known stocks often provide great value. This may just be the case with Acacia Research (Nasdaq: ACTG). The company recently agreed to acquire privately held Adaptix in a $160 million all-cash deal, as part of a strategic move to cash in on the future 4G success story.
Why Adaptix?
Adaptix holds around 230 patents related to 4G wireless network technology, which is perhaps why Acacia has deviated from its standard procedure of purchasing a set of patents and acquired the entire company instead. 4G is the face of tomorrow's networking technology, with major carriers including Sprint Nextel, AT&T, and Verizon preparing for it, as they anticipate an explosion in data-centric demand.
The feel-good factors
Acacia's trailing-12-month revenue as of Sept. 30, 2011, came in at $177 million, reflecting a 27.8% rise over the comparable year-ago period. Investors should also take note of the fact that the company's technology licensing programs have increased to 108 in the third quarter from 87 in the prior-year period.
Acacia seems to have left patent licensing competitor Rambus (Nasdaq: RMBS) far behind, as the latter grappled with a 60% fall in share prices as it lost antitrust lawsuits against Micron and Hynix. While the future of Rambus is closely tied to the courts, Acacia has gone one up simply on the basis of its diversified portfolio.
The Foolish takeaway
Acacia's licensing operations have met with considerable success, as it holds close to 40,000 patents and boasts of clients including Microsoft, Oracle, IBM, and Intel. The company has grown its top line over the last four years and has a very stable management team.
And now, with its attempt to gain control of technology rights in an area like 4G, it certainly seems to be a solid investment proposition in the long run.
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