Tessera Technologies, Inc. (TSRA)

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Tessera Technologies Inc. (TSRA)

Q4 2008 Earnings Call

February 2, 2009; 4:30 pm ET


Hank Nothhaft - President & Chief Executive Officer

Mike Anthofer - Executive Vice President & Chief Financial Officer

Barney Cassidy - General Counsel

Moriah Shilton - Investor Relations


Brett Hodess - Merrill Lynch

Raj Seth - Cowen & Company

Olga Levinson - Barclays

Mehdi Hosseini - FBR

Daniel Giltouch - Rowing Brook Capital

Kevin Vassily - Pacific Crest



Good afternoon. My name is Wesley and I’ll be your conference operator today. At this time I’d like to welcome everyone to Tessera’s fourth quarter 2008 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker’s prepared remarks, there will be a question-and-answer session. (Operator Instructions)

I would now like to turn the conference over to Moriah Shilton. Please go ahead ma’am.

Moriah Shilton

Thank you, Wesley and good afternoon everyone. This is Moriah Shilton, Director of Investor Relations for Tessera Technologies speaking. Thank you for joining us for the Tessera Technology’s fourth quarter 2008 results conference call. This call is being broadcast live over the internet. A webcast replay will be available at www.tessera.com for 90 days after the call.

In addition, a telephone replay of this call will be made available for 48 hours beginning approximately two hours after the completion of this call. To listen to the replay in the U.S., please dial 800-642-1687 and internationally dial 706-645-9291. The access code is 78822353.

Before we begin I would like to remind everyone the today’s call including the Q-and-A session will include projections and other forward-looking statements, regarding expected revenue and earnings per share, as well as future plans, opportunities and expectations of the company. These projections, estimates and other forward-looking statements involve known and unknown risks and uncertainties, that may cause actual results to differ materially from those expects or implied on the call and are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.

You are cautioned not to place undue reliance on the forward-looking statements, which are made based on information known to the company as of today’s date. The company assumes no obligations to update the information contain in this call, which speaks only as of today’s date.

A detailed discussion of the material factors that may cause results to differ from the statements made can be found for example, in the Risk Factors section of Tessera’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2007 and its quarterly report on Form 10-Q for the quarter ended December 30, 2008.

On the call today from management are Hank Nothhaft, Tessera’s President and Chief Executive Officer; Mike Anthofer, Chief Financial Officer and Barney Cassidy, General Counsel.

During this call today, management will discuss certain non-GAAP financial measures for comparison purposes only and they will be using non-GAAP numbers in their prepared remarks. The non-GAAP amounts of cost of revenues; research and development; selling, general and administrative expenses; net income and earnings per share do not include the following Stock-based compensation, acquired intangibles, amortization charges, charges for acquired in-process research and development and non-cash tax expense.

Management believes the non-GAAP amounts provide a more meaningful comparison, a measure of quarter-over-quarter and year-over-year financial performance. Please refer to the company’s fourth quarter 2008 earnings press release and to the company’s website for reconciliation of non-GAAP measures to GAAP.

After management’s opening remarks we will open the call to your questions. So, that management is able to respond to as many of you as possible, please restrict yourself to an opening and a follow-on question. Please re-enter the queue if you have additional questions.

With that, I will now turn the call over to Hank.

Hank Nothhaft

Thank you, Moriah. Greetings to all of you and we appreciate your interest in Tessera. We’ve got to lot to cover this afternoon, so we’ll jump right into our presentation. Total revenue in 2008 was $248.3 million and royalties and license fees were $220.3 million up 27% and 37% respectively compared to 2007.

Before I discuss the fourth quarter 2008 in more detail and our recent accomplishments, I want to comment on our recent IP protection efforts, including the decision last Friday by the International Trade Commission to review the initial determination by the Administrative Law Judge, ALJ, in our wireless ITC action. The commission’s final determination is scheduled to be issued by April 3 and may accept or reject the initial determination in part or as a whole.

If the ITC determines that the expert’s methodology was appropriate, that will have a significant impact on the party’s expert discovery and trial presentation in our Subcon ITC Action, which is currently scheduled to begin April 27. Therefore today we filed a motion requesting that the ITC pause proceedings in this action.

Given prior acceptance of the same basic methodology by the ITC and the Amkor tribunal, we believe it makes sense to allow the ITC to issue its decision regarding infringement methodology, before moving forward in the Subcon ITC Action, so that the parties and their experts may proceed in view of the ITC’s rulings. We are seeking an expedited ruling from the ALJ in this matter and may receive a ruling by February 9. If Tessera’s motion is granted, the Subcon ITC Action would resume after April 3, which are rescheduled for later this year.

With regard to our Arbitration with Amkor, in January, the International Chamber of Commerce’s, International Court of Arbitration issued the final award. The panel found our patents were valid and enforceable. As part of that ruling, the panel accepted our expert Dr. Qu’s testing methodology and calculations for proving that products were made under our patents. The panel granted us $64.1 million, which covers the time period March 2, 2002 through December 1, 2008 and pre-judgment interest. The full payment from Amkor is due by February 15, 2009.

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