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This Patent Portfolio "Dream Team" Just Got Even Better

When we recommended micro-cap tech play eOn Communications Corp. (NasdaqCM: EONC) last month, we told you to expect a pretty wild ride.

And that's just what we've seen.

Since recommending the stock back on March 20, eOn's shares have traded as high as $6.46 and as low as $3.56 – underscoring why we advocated a holding-period strategy, instead of our usual "trailing-stop" approach to risk-management. And we also suggested that folks break their intended position into two purchases, using a "lowball" order of $4.60 a share to get the second half.

After giving folks a chance to fill that order, the stock soared as much as 29% yesterday, before surrendering some of the gains late in the day. About half an hour before the market close yesterday the shares were at $4.65, up 14% for the day.

"This goes to show why we recommended this stock, and why we recommended the buying strategy that we did," said Radical Technology Profits editor Michael Robinson. "We see this as a stock with a tremendous – and I do mean tremendous – potential upside. But it's going to be one heck of a ride to get us there. We expected these big swings, which is why we advocated the split-purchase strategy. And it's also why we recommended the minimum one-year holding period – instead of our usual 25% trailing stop. I just knew that if we used a trailing stop, you'd almost certainly get 'stopped out' by its regular volatile trading pattern. And by getting stopped out, you'd miss out on a shot at what I believe could be some very big profits."

Michael is so excited by this stock because it's one of the best "intellectual property" plays around.

To see why, just look at the management team – which I've referred to internally as a "Dream Team for IP Investing."

And that "Dream Team" just got even better.

Last week, eOn announced the hiring of Saxon Noh as its vice president and intellectual property counsel. Noh is a heavy-hitter in this realm.

"Bill, I really like this move," Michael told me. "Noh has extensive experience in this area. He previously served as principal litigation counsel at chipmaker Rambus Inc. (NasdaqGS: RMBS), where he managed complex patent and antitrust litigation matters. Thanks to his work, Rambus scooped up more than $1 billion in additional payments thanks to settlements and license fees. And the move just underscores what I told your folks last month – that Inventergy-eON is putting together one of the world's top IP teams."

A Tech Tale to Tell

For those of you who are new to this, we need to fill in some of the "backstory" on this company.

And it's a pretty amazing tale.

"It all starts with a legend in the whole IP (intellectual-property) realm – a guy named Joe Byers," Michael said. "This is a guy who is unrivaled in his ability … his understanding … of how to take a robust IP portfolio and turn it into revenue – into cash. This is a guy who logged 34 years at Hewlett-Packard Co. (NYSE: HPQ), where he led that tech leader's massive IP-licensing program."

Neither HP nor Byers have ever disclosed the actual dollar value of all of this dealmaking. But here's what we do know: During his time at HP, Byers helped boost the income from the company's patents and other intellectual property 20-fold in just six years.

Companies – especially in the tech arena – funnel hundreds of millions, even billions of dollars into research and development (R&D). The goal, of course, is to turn that into marketable products and services.

But the yield is pretty low. So companies are increasingly looking for other ways to "mine" their troves of IP. At the same time, they have to protect it, to make sure other companies don't encroach on it, or steal it outright.

And Byers, you see, is an expert at extracting value from all the invested capital. What's more, he's also an expert at starting new tech firms and in engineering merger-and-acquisition (M&A) deals.

With eOn, Byers is bringing all those skills to bear.

And he wants to turn the telecommunications-technology sector upside down.

A New (And Tough) Kid on the Block

Several months ago, Byers launched privately held Inventergy Inc. as a patent-and-IP-licensing firm. He's already locked up hundreds of valuable assets.

Detractors might dismiss Inventergy as nothing more than a "patent troll," a derogatory term for an operation that just sues other companies over real or imagined patent infringements.

Byers sees it differently. He argues that the philosophy behind the creation of Inventergy is to leverage his HP expertise – to take the technology that companies have spent so much time and money developing and get it out into the marketplace, where it can generate a healthy stream of sales, cash flow, and profits.

That's where eOn Communications comes in.

"You see, Bill, Byers recently engineered what's known as a 'reverse merger' – a really brilliant move that combined Inventergy and eOn," Michael said. "This takeover is a unique way of making Inventergy a publicly traded firm while simultaneously allowing Byers to extend his global telecommunications reach. Once the merger is complete in the next few months, eOn will change its name to Inventergy Global Inc. in a move that underscores its radical transformation. As you can tell from my comments, I love this move – because it telegraphs big opportunities to come."

Founded in 1897 as a switchboard company, eOn today provides Internet telephony and phone services (referred to as 'unified communications') that blend wired phones and wireless messaging.

Byers clearly has bold ambitions for Inventergy. In early January – in a single move – he actually quadrupled the number of patents in Inventergy's telecommunications portfolio.

He did this by purchasing about 500 Panasonic Corp. (OTC ADR: PCRFY) patents that cover key 3G and 4G wireless communications technologies. Byers notes that these new IP assets provide geographic coverage in 18 countries with more than 80 telecom operators handling more than 2.5 billion mobile broadband connections.

With all of this done, Byers is now setting up a "toll booth" on the telecom-technology superhighway, and is going to charge folks who want to travel his road and see what he's built. He's pulled together an all-star team of toll-collectors who will protect his investment.

Noh is kind of his toll-collector-in-chief.

"Mr. Noh is one of the most talented young litigators in the Valley. He brings the ideal experience and skill set to his role, and we are thrilled to welcome him to the company," Byers said. "His breadth of experience related to patent litigation and licensing, as well as strategic IP portfolio development, make him an important addition to our leadership team and a critical component to our commercialization efforts and continued growth."

But he's got an all-star team behind him – the "IP Dream Team" I mentioned before.

This "Dream Team" Can Dunk, Too

According to Michael, Byers' IP Dream Team has a century of combined intellectual-property experience, and all told has managed about $15 billion worth of assets.

Some key executives include:

  • Clifford Loeb, director of standards licensing. A long-time Byers associate, Loeb spent 38 years at HP, where he negotiated some of the computer giant's key patents covering technology for cellular communications, Blu-ray optical video, and Wi-Fi networking.
  • Charlie Bedard, director of technology. He formerly served as director of software engineering at Cisco Systems Inc. (NasdaqGS: CSCO) and was a member of the networking giant's patent-review committee.
  • Anna Johns, vice president licensing. Her experience includes a stint as director of patent licensing and commercialization at Swedish telecom giant Ericsson (Nasdaq ADR: ERIC), a stock we've also recommended to you.
  • Wayne P. Sobon, senior VP (SVP) and general counsel. His background includes head of IP legal affairs at Rambus Inc. (NasdaqGS: RMBS), a leading maker of semiconductors and memory chips.
  • Jon Rortveit, SVP, IP acquisitions & licensing. He formerly served as CEO of TYNAX Inc., a privately held global patent broker and technology-trading exchange.

Like I said … a Dream Team.

"Backed by stellar executives, the firm already has acquired hundreds of patents in its portfolio; and with Noh on board, it is poised to add even more license fees," Michael said. "It's one of the best executive teams of this type that I've seen … and I mean anywhere. This team will continue to build a portfolio of critical patents that it can license on a global scale – but without the overhead that comes with designing and building products from scratch."

Buying Strategies Redux

We said this before, but it bears repeating here: This is a very-high-risk stock play – meaning it's not for the faint of heart. It is going to be volatile.

But we've done patent-portfolio investments before, and have done very well (with IP-portfolio play iRobot Corp. (Nasdaq: IRBT), for instance, we notched a near-double). But Michael also recommended it to subscribers of his top-tier Radical Technology Profits trading service, which underscores his belief in the "investment case" he's shared with us here.

"As we said a month ago, Bill, and we're repeating here: We do face some risks with this deal," Michael explained. "With a market cap of just $13.4 million, this is a fairly thinly traded stock. Ordinarily, a market cap that small wouldn't meet my minimum standards. But Byers and his team of industry veterans are risking their careers and reputations on this deal, which gives me the confidence to buy the stock."

We initially recommended splitting your investment in two tranches: Buy the first at the market (the stock closed at $5.62 the day before our recommendation), we said at the time. And establish an additional "lowball" limit-order price of $4.60 for the second half (that price was "triggered" in the sell-off). Plan on holding this stock for at least a year, we said.

If you're new to this recommendation, we'd approach the stock in a similar manner. Buy half your intended position at the current market, and put in a "lowball" limit order at $3.85, the 52-week low. Don't force the fill (meaning, if you don't fill the second half, don't worry about it – just ride with what you have). And plan on holding the position for at least a year.

And never "load up" on a stock like this: Limit your purchase to 1.5% or so of your holdings.

"We like this because it's an approach that will give us enough time for the merger to go through and get digested," he said. "Your broker should automatically change the name and ticker symbol when the deal closes, but Bill and I will update you along the way."

"This is one of the very best patent-portfolio plays in the tech market today," Michael said. "And when you look at the amount of technology the company has amassed, and at the plans the company has vis-à-visthe reverse merger, and look at the team that's been created to exploit all this high-tech gold … it's just too good to pass up."

See you all tomorrow.

[Editor's Note: Unless we direct otherwise, as we've done here, we recommend you employ a 25% "trailing stop" on all holdings.]

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  1. 000061436384 | May 14, 2014

    Just wondering what your thoughts are, now that EONC has dropped all the way to 2.30 range. Any updates on what's going on? Is it even a better buy now? Should we stay away? Any more insight would be much appreciated

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