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A Tiny Giant In Video Patents

The powerhouses of cable and satellite TV are starting to feel the presence of tiny Acacia Research-Acacia Technologies (ACTG), which owns 127 patents covering digital media transmission, mainly video on demand. According to CEO Paul Ryan, Acacia has licensed 294 cable-TV and Net outfits -- including Bloomberg and Disney (DIS) -- to use Acacia technology. Acacia has filed lawsuits against Comcast (CMCSA), Cox, DirecTV (DTV), EchoStar (DISH), and Charter (CHTR) on alleged patent infringement. "Experts believe Acacia will prevail," says Paul Haber, an investment adviser at Leeb Group. If so, he sees revenues of about $100 million a year through 2011, based on recent six-year licensing pacts. The stock, now at 5.55, is worth more, he says. Still in the red, Acacia posted revenues of $4.3 million in 2004. Ryan sees a jump in revenues from any settlement or court victory alone. DirecTV (DTV) says it will vigorously fight the suit, as it believes it has no merit. Comcast didn't return calls; the other companies declined comment.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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