However, the second-quarter earnings results were not that impressive. While revenues increased 44% year over year to $4.4 million, and net income more than tripled to $1.2 million over the same time frame, there were zero royalty revenues. Indeed, the company is still generating most of its revenues from product sales, which, as fellow Fool Jack Uldrich mentioned earlier this year, have generally modest expectations.
I, for one, am skeptical of this company. CEO Daniel Baker not only has a checkered past, but also a history of making optimistic forecasts and failing to deliver. Indeed, in a December 2004 interview, Mr. Baker forecast that in five years, MRAM could be a "universal memory," and that it has the potential to revolutionize memory design. Nearly three years later, it is clear that those predictions were far off the mark.
At the time, NVE was pinning its hopes on two licensees, Cypress Semiconductor
Coincidentally, Freescale did announce an MRAM product in commercial production earlier this year. Mr. Baker then mentioned Freescale shortly afterwards, when he stated in a conference call that based on a "preliminary analysis that we believe that Freescale's MRAM comes within the scope of claims within a number of NVE patents." The stock more than doubled after that particular call. If investors aren't wising up to the constant promotions, lawyers certainly are. Several class action lawsuits were filed against NVE earlier this year, alleging it made materially false statements regarding MRAM's future potential.
Even if NVE wants to pursue a legal case against Freescale/Motorola, with roughly $13.5 million in cash and investments available, it won't get far before that cash runs out. Rambus
If you ask this Fool, NVE investors need a dose of reality. Thus far, this company is just spinning you along.
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