Google Inc (GOOG) Plans to Break Vringo

Google Inc (NASDAQ:GOOG) and Vringo, Inc. (NYSEAMEX:VRNG) are still at trial over whether Google has infringed upon one of Vringo’s patents. The premise of the Google lawsuit includes a patent that was filed by one of the earliest and biggest search engines, Lycos. We still believe that Google should not worry about the tiny tech company. It also appears that insiders were a bit wary about whether Vringo could pull off the upset, as a number of insiders dumped shares above the $4 per share mark before the end of October.

Sergey Brin

Vringo has seen its shares pushed down by more than 25% over the past week after eclipsing $4.50 per share on the hopes that the company could pull off the patent lawsuit win against Google Inc (NASDAQ:GOOG), and score some big money in the process. Earlier this week, the company’s shares took a hit on the news that the judge was going to only award damages, should Vringo win, that go back only to the filing date of the lawsuit.

Google Inc (NASDAQ:GOOG) has refused to settle, and showed no interest in buying the company. Possible estimates before the back date announcement were upwards of $700 million; however, now the award could be sub-$100 million, if any. Either amount is a small portion of Google’s $40+ billion of cash and short-term investments.

Vringo inherited the lawsuit after its acquisition of Innovate/Protect. The Innovate/Protect lawsuit included patent infringement claims against Google Inc (NASDAQ:GOOG), AOL, Inc. (NYSE:AOL) and other mega-tech companies. AOL decided to partly settle its lawsuit by paying Vringo $100,000. Despite having fallen far from grace from its dominant position atop the Internet search game, the company has reformed itself into more of a media company with the 2011 acquisition of the Huffington Post. The company is now an interesting investment opportunity, trading at only 3x earnings. As well, the company is expected to grow five-year EPS at 25% annually. AOL also has big backers as investors, including Bain Capital, Jana Partners and David Shaw.

Regarding Google Inc (NASDAQ:GOOG), the speculated amount that Vringo is looking for has been said to be around $700 million, where the company’s current market cap is a mere $160 million. The worry for Vringo investors is that if Vringo comes up short on the Google lawsuit they will have a tough time raising money to pursue other patent lawsuits, especially given the company has no sustainable earnings. Vringo has only $3.3 million left in cash, versus total liabilities of $5 million, and the company has burned around $4.8 million per year measured by cash flow from operations over the last four years.

Vringo recently bought 500 wireless patents from Nokia Corporation (NYSE:NOK) in August for $22 million. Vringo has recently filed a lawsuit against the U.K.’s ZTE using the patents acquired from Nokia. Although the patent sale by Nokia means cash for the tech company, there are still a number of concerns; this includes not being the laughing stock of the smartphone industry. In the hedge fund industry, Jim Simons dumped 50% of his 1Q stake during 2Q.

In short, Nokia has too many concerns over its core handset business for us to get excited about its Lumina line, as the company is expected to see earnings down 200% year over year by the end of 2012.

There are thirty funds with at least 5% of their 2Q 13F invested in Google Inc (NASDAQ:GOOG); check out all of the funds here. As well, the top two funds by shares owned, Lone Pine Capital and Lansdowne Partners, had almost 5% and 10%, respectively of their 13Fs invested in the company.

Following Google’s botched earnings release and gross miss, Oppenheimer downgraded the company. Google Inc (NASDAQ:GOOG) posted last quarter earnings of $9.03, compared to consensus of $10.67. The company has promising growth but there have been concerns over the site’s revenue and its Motorola acquisition. Motorola recorded an operating loss of $527 million, and Google took a $349 million charge associated with the business.

Although we would not invest in Vringo given its bleak outlook and overly speculative nature, we might hesitate to pull the trigger on Google Inc (NASDAQ:GOOG). The Vringo lawsuit is likely weighing very little on the shares, but we still believe that Google may be peaking; check out our three reasons why.

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!