Hello investor,
On November 22, 2024, I shared a new special situation trade we initiated via Substack chat. The company is called ParkerVision (PRKR) and it’s currently in an infringement lawsuit against Qualcomm (QCOM) for stealing its patented technology.
We originally got this idea from Yaron at 1 Main Capital through his Q3’24 fund letter. He has done a ton of work on the name, and truthfully, it was enough to convince me to take a position in the trade.
Me doing a seperate note on this wouldn’t be necessary since Yaron did the heavy lifting already, that’s why we’re doing an audio overview vs another write-up.
You can find his detailed PDF below (12 pages), which outlines everything. I’m making this post just an audio overview of his work. I have added no additional context besides what’s written in the PDF below.
If you haven’t already, I would follow him on Twitter to get helpful updates regarding the name as well as just general commentary and idea generation.
I’ve gone ahead and included two noteworthy questions that I feel are pertinent to this situation that you all might find useful.
As always, if you enjoy this content, please be sure to subscribe and share it with friends.
What are the potential financial outcomes and risks involved for all parties?
The sources describe ParkerVision's (PRKR) technological innovation as a "seminal breakthrough" and one of the "biggest and most important inventions in the wireless industry". Here's why:
Revolutionized RF Transceivers: PRKR pioneered direct conversion radiofrequency (RF) transceivers. This technology enabled the combination of transmitters and receivers onto a single chip using energy sampling for receivers and pulse shaping for transmitters, marketed as Direct-to-Data (D2D).
Eliminated Bulky Components: Before PRKR's invention, wireless devices used carrier I/Q signals, which required physical combiners for transmission and splitters for receiving. These components were bulky and negatively impacted performance. PRKR's D2D technology eliminated the need for these components by sampling the carrier signal, effectively creating smaller, cheaper, faster, and better RF transceivers.
Impact on Smartphones: This innovation was particularly significant for smartphones, which operate on multiple RF frequency bands. Without PRKR's invention, smartphones would have been significantly larger and more expensive.
Wide Industry Adoption: The sources suggest that after Qualcomm (QCOM) allegedly appropriated PRKR's technology, the rest of the wireless industry followed suit, replacing traditional analog technology.
Internal Recognition by QCOM: Internal QCOM emails, presented as evidence in the first patent trial, highlight the significance of PRKR's invention.
A QCOM senior engineer referred to PRKR's technology as the "holy grail" of RF receiver designs.
Another QCOM engineer stated that PRKR had "stumbled on something revolutionary".
QCOM's Chief Technology Officer believed it would be very difficult for anyone to use this technique without infringing on PRKR's patents.
Financial Implications: QCOM's internal financial models estimated an acquisition value of $446.8 million for PRKR. Another model projected that QCOM's earnings would double in 2000 if they could utilize PRKR's technology.
The sources strongly emphasize that PRKR's innovation was a groundbreaking development in wireless technology that had a substantial impact on the industry and, particularly, on the development of smartphones.
Potential Financial Outcomes and Risks for ParkerVision and Qualcomm
The sources primarily focus on the perspective of ParkerVision (PRKR) and its potential financial gains from its patent infringement lawsuit against Qualcomm (QCOM).
ParkerVision's Potential Outcomes and Risks
Potential Outcomes:$2.6 Billion in Damages: This is based on PRKR's expert report seeking $1.3 billion for 1.6 billion infringing units plus an estimated $1.3 billion in pre-judgment interest.
Additional Upside from Other Cases: PRKR has cases against other companies, including Apple, LG, and Texas Instruments, with potential recoveries in the hundreds of millions of dollars.
Willful Infringement Damages: If the court finds QCOM willfully infringed, damages could be tripled.
Risks:Case Delay or Failure: While PRKR is in a strong legal position, there's no guarantee of a win.
Low Settlement Offer: QCOM may pressure PRKR to accept a low settlement.
Fundraising Needs: PRKR may need to raise additional funds before the trial, although the case is being litigated on a full contingency basis.
Contingency Fee: PRKR's law firm will receive 25% to 40% of any winnings.
Qualcomm's Potential Outcomes and Risks
Potential Outcomes:Minimal Financial Impact: Even a $2 billion loss represents a small portion of QCOM's annual revenue and profit.
Continued Market Dominance: QCOM currently leads the transceiver market, and a loss may not significantly impact its position.
Risks:Reputational Damage: A finding of willful infringement could damage QCOM's reputation and make it harder to attract partners and customers.
Increased Scrutiny: The case may draw attention to QCOM's business practices and lead to further legal challenges.
Higher Royalty Payments: A loss could embolden other companies to seek higher royalties from QCOM.
Overall, the sources suggest that PRKR stands to gain significantly more from a favorable outcome than QCOM stands to lose. The case represents a substantial opportunity for PRKR to be compensated for the alleged infringement of its intellectual property.
For QCOM, the financial impact of a loss may be relatively minor, but the potential damage to its reputation and future business dealings could be more significant.
Until next time,
Paul Cerro | Cedar Grove Capital
Personal Twitter: @paulcerro
Fund Twitter: @cedargrovecm
Share this post