Vringo (VRNG) is arguably among the most exciting and debated stocks of the past few years. However, its share price hasn't appreciated yet, albeit some short-lived momentum rallies. But the risk vs. reward profile has improved significantly, and I think a great buying opportunity has emerged. While most eyeballs are on the high profile case against Google (GOOG) (GOOGL), I believe the somewhat more off-the-radar trial against ZTE (OTCPK:ZTCOF) will be the prime catalyst this year. Major developments indicate a big settlement is in the cards that could send shares substantially higher.
. Remember, ZTE represents just 10% of the global telecom equipment market, which is worth over $100 billion.
. ZTE has a history of settling with pursuers (Ericsson, Dolby, etc).
A settlement with ZTE would be a game-changer
Vringo's goal is to obtain a global licensing agreement. Given the fact that ZTE is a multi-billion dollar company, any agreement, whether global or country specific, would bring in millions to Vringo's balance sheet, by either a lump sum payment and/or a royalty fee. How much? That is hard to exactly pinpoint, but given the sheer size of ZTE, Vringo's term sheet, and a realistic royalty fee of 5%, I would expect a net proceeds of more than $100 million, which equates to what the Maxim Group has calculated. This is on a conservative note, the final numbers could be much bigger.
From : Seeking Alpha June,11,2014
