The buzz surrounding Vringo, Inc. (AMEX: VRNG) continues to get louder as their October 16, 2012 court date against Google, Inc. (NASDAQ: GOOG) draws nearer, inspiring investors and leading many analysts to kick up astronomical figures that could potentially be awarded to the technology company that develops and provides software products for mobile video entertainment, personalization, and mobile social applications.
Of course Google isn’t the only big name that VRNG is claiming infringed upon their patents, add AOL (AOL), Gannett (GCI), Target (TGT), and IAC (IACI) to the list; meaning any kind of court victory or settlement could send the company’s share price through the roof. Currently shares of VRNG are trading around the 4.10 level, well above the 3.50 they were at last week and the 0.68 from January of this year. Some analysts are predicting that share price could jump past the 30.00 mark the impending patent infringement suit falls in favor of VRNG.
While just about every article on this subject has assumed VRNG will score a massive victory against the search giant Google investors know there are no guarantees. Thinking that a quick investment at the current share price will deliver mind-blowing returns in just a few months could be disastrous if things don’t go according to plan.
That being said, VRNG does appear to be in a pretty enviable position and their complaint against these large companies has been given some validation as evidenced by a favorable Markman hearing that supported the company’s stance.
Looking at the claim against Google, VRNG has claimed that over the last six years the company has generated $67 billion while using their patents related to how search and advertisement results are sorted. It is VRNG’s belief that they are entitled to damages on not only the $67 billion but on Google’s future earnings as well, at least for the next four years. How much could be awarded depends upon a number of factors but if VRNG can prove that Google willfully infringed on their patents then the figure could be several billion.
What all of this has done is lead many to believe that a settlement prior to trial will occur, figuring that Google won’t take the risk. There is also the possibility that Google will simply try to buy VRNG, a move that could essentially squash the claim against them. While Google could make the effort to purchase VRNG such a move could be seen as an admission of guilt and add even more value to Vringo.
The possibility that somebody like Yahoo or Microsoft might step in and try to purchase VRNG is also out there. This belief has gained support as more and more people believe they could be the target of a future suit if a victory over Google is secured. Of course if Yahoo or Microsoft did purchase VRNG it wouldn’t be the end of Google’s problems, it would only mean the plaintiff’s name changes.
If a settlement is reached prior to trial, as most cases are, VRNG still has a number of companies on their radar and a settlement with Google could lead to a quick settlement with the others.
Without question VRNG appears to be in a good position at the moment and even with shares trading well above their 50-day moving average of 3.69 and their 200-day moving average of 2.24 their current share price may look like a bargain in a few months. But again, there are no guarantees when it comes to these things and it is pretty clear that VRNG has all of their eggs in this basket.
Failure to reach a settlement may serve to kick up the share price prior to trial but if VRNG is dealt an unfavorable ruling the company will almost certainly see a significant portion of their value disappear. That is a risk investors have to acknowledge but with the information that is out there right now it appears as if those investors are willing to take that risk.