Don't show againAtrua Technologies Files Countersuit Against AuthenTec
AuthenTec (Nasdaq: AUTH), the world’s leading provider of fingerprint sensors and solutions, found itself on the other side of a recently filed patent infringement case against Atrua Technologies, a privately held company that also creates fingerprint sensors and solutions.
On May 18th, 2008, Atrua filed a countersuit against AuthenTec for infringement of Atrua’s patented technology and illegal interference with Atrua’s business.
The countersuit comes only a few months after AuthenTec filed their original patent infringement lawsuit against Atrua alleging that THEY (Atrua) infringe on some of AuthenTec’s patents…
Now this is starting to get ugly, and adds more distraction and potential costs just when AuthenTec won a summary judgment only a week ago against Atmel Corp. (Nasdaq: ATML) in a similar patent protection case.
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New Countersuit has “Distraction” Written All Over It
You won’t find a lick of news about this countersuit anywhere on AuthenTec’s website or press releases, but of course, why would they let anyone know and draw undue attention to the matter, right?
The good news in this case is that with both the original AuthenTec patent suit, and now the countersuit by Atrua, we might get a resolution to the matter quicker and put a definitive ruling out there with which to work by.
In the press release, Anthony Gioeli the CEO of Atrua stated:
“In addition to conducting our own thorough review of Authentec’s allegations against us, legal counsel and customers have now carefully reviewed the asserted patents and concluded that there is no merit to Authentec’s suit.”
“In the midst of this review, however, it became apparent that Authentec’s fingerprint solutions violate a key patent of Atrua’s. To protect our patented technology, we filed a countersuit against AuthenTec to stop its infringement of our patent.”
Who The Heck is Atrua Anyway?
Well, there isn’t much public information on Atrua since they are still a private company, but according to their own sources, Atrua has a portfolio of over 40 pending or granted patents related to fingerprint sensors and the related sensing technology.
Atrua Technologies Wings Fingerprint Sensor
Notice they didn’t say PATENTED approach! Remember, AuthenTec is still the only fingerprint sensor company with a patent for verifying a person’s fingerprint using the layer below the skin’s surface, which virtually eliminates the need of having a fingerprint! No one else has this, and was one of the strong reasons for investing in AuthenTec.
As you can see from the image on the left, Atrua indeed already has a small sensor that looks to be even smaller than anything AuthenTec has out on the marketplace yet.
In addition, Atrua’s sensors are ONLY for the wireless market, and not being developed for PC’s, or the Access Control market like AuthenTec. They are basically going for the niche of cell phone manufacturers and it appears from what Atrua says on their website, and press releases, that they are doing rather well.
In fact, Atrua claims to have an 80% share of all new fingerprint phone design wins announced since the beginning of 2007.
This could mean that they are going to start seriously eating into AuthenTec’s market share as things move forward.
Bottom Line
With AuthenTec winning last week’s summary judgement against Atmel Corp., it appeared that perhaps we would clear these legal hurdles cleanly and without much impact in terms of cost or management distraction.
With Atrua filing their counterclaim against AuthenTec, that has changed.
This case now becomes a more serious matter in that Atrua could garner a court win that might also call for an injunction on AuthenTec’s current products, and would severely cripple AuthenTec.
It’s way too early to tell what’s going to happen, and I want to get management’s take on the situation (we’ll probably have to wait till their next earnings call), and see how this plays out before reacting one way or another.
One thing is for certain: The plot has thickened over at AuthenTec, and not in a good way.
|
*Variables You Should Know About AuthenTec (Nasdaq: AUTH) |
|
|---|---|
| Current Recommendation: |
BUY |
| The Company: | AuthenTec, Inc., is a fabless mixed-signal semiconductor company that provides fingerprint authentication sensors and solutions to the high-volume personal computer (PC), wireless device, and access control markets. |
| Why Buy Now: |
|
| Market Cap: |
$380.00 |
| Revenue (TTM): |
$58.60 |
| Cash/Debt: |
$67 / $0 |
| Current Price: | $13.50 |
| Risk Rating (?): | 7.5 (Moderate-High) |
| Position Size (?): | 1/4 (12-17-07), 1/4 (1-17-08), 1/4 (1-23-08) |
| Buy Around Price (?): | $13.50 (12-17-07), $13.25 (1-17-08), $12.00 (1-23-08) |
*As of 5-19-08. Except share price, all values in millions.
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(12) comments to “Atrua Technologies Files Countersuit Against AuthenTec”
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PeakStocks.com welcomes and encourages reader comments. Add your voice to the discussion whether you agree with me or not.
June 5th, 2008 at 6:03 pm
Authentec are not the only Company to use RF to read fingerprints. The real market success story is Validity Sensors - if anyone is taking Authentec’s market share it is Validity.
June 6th, 2008 at 12:54 am
Oh oh, here we go again!
Another person that claims that they know of a technology that’s going to take market share away from one of the companies that I recommend!
Do you guys all work for the companies you claim are going to rule the world?
First it was SoundBite and the various posters telling me that SoundBite was going down because their tech. was no good, and now this?
I am only reporting it the way I see it.
Until I get substantiated proof that Validity Sensors is taking market share away, the way that I got proof already from Atrua, then you are arguing a moot point.
Come back when you have some firm data and I would love to hear what you have to show.
Chris
June 7th, 2008 at 6:27 am
Everyone’s a critic, Chris. Stand your ground.
Fundamentals aside, I cannot help but voice concern over officers’/directors’ promotion of the stock to brokerage houses and mutual funds coupled with incessant exercising of options and immediate sale thereof. These supposedly “responsible fudiciaries” seem to be insatiable.
Your thoughts? Is their behavior pressing the legal limits?
June 7th, 2008 at 5:46 pm
Peg,
Yep, this is a little disconcerting, and I have been trying to get a straight answer from management but have been blocked on all sides by the gatekeepers…
That being said, I have been monitoring the selling very closely, and while a little alarming, it is not at panic selling yet, or anything close.
In fact, if you add up the amounts being sold, it’s about 50-150k per transaction, and sometimes way less…no one is cashing out here and getting rich.
On the same front, the management team has been awarded more options, so it looks to me what they are doing is swapping out these in-the-money options, for the new ones they are being granted, and essentially, their stake is staying the same.
I’m definitely aware of it, and staying on top of it, but it’s nothing like First Solar’s CEO that sold over 250k shares the other day and netted $75 million!
That would cause me concern!
At this point, AuthenTec’s selling is within a normal range that I consider part of executive compensation, and nothing more, but still bears watching.
Chris
June 10th, 2008 at 8:58 am
Just curious if you feel the same today after this latest round of insider selling.
June 10th, 2008 at 1:50 pm
Hey Peg,
Yea, I saw all of that.
The actual filings were updates on the previous 10-b filings that had incorrect information in them.
There were a couple of new ones, but again, the share sizes and selling are so small at this point, it does not alarm me, but again, the CEO was buying shares on the open market at $10.00 share, and then selling them at a lower price under these same prearranged trading plans, and of course now that the share price is higher.
I’m keeping my on it, but as long as AuthenTec keeps executing, and so far they are really kicking butt, then the CEO/founder selling some shares after being in the business for 8 years is a fair deal.
I’ll keep you posted.
Chris
August 31st, 2008 at 3:02 am
Auth $8.12!
Time to look again maybe?
You need to analyse the old fabled Moore’s Law. Authentec can’t shrink their silicon any further without degrading performance and their customers know it. Email me if you want another opinion.
August 31st, 2008 at 7:32 pm
Paul,
If by look again you mean purchase more shares?
Then yes, that’s exactly what you should do.
As far as Moore’s law is concerned, AuthenTec is not looking to make the smallest fingerprint sensor possible, that would defeat the whole purpose don’t ya think?
I am always looking for those willing to provide intelligent and well thought-out commentary on any of my picks, even if it goes against my investment thesis.
So please, post back and let me know your thoughts.
Chris
June 15th, 2009 at 2:23 pm
Chris,
I wouldn’t call the cellphone market a niche market. That’s the future. I recently bought AUTH just under $2/share and I’m hoping they get a few large cellphone design wins. If not this stock has no real future. You thoughts?
June 15th, 2009 at 2:46 pm
Paul,
I am ready to sell my AuthenTec position.
I think they are a lost cause, but I’ll wait a little longer and gather more data first.
Chris
June 15th, 2009 at 3:57 pm
I’ve recently received the legal wind up notice from Atrua - as a creditor (shares only) I don’t think there’s anything of value left in Atrua. Don’t forget - they went after the cell phone market. You have to have big balls and $1 parts to go after this market. Again Authentec will never reach that price point and still have any operating margin. I don’t think that even if they were purchased back by a Silicon House that the technology could effectively address this market, before the market changes and moves to other technologies.
June 15th, 2009 at 6:09 pm
Paul,
I agree…might be time to wind down our investment in AUTH either way.
Chris