On royalties, my impression is that SPYG has been getting rid of the royalty producing business, like SurfWatch. What is unclear to me is whether a consulting contract, such as the current one with Microsoft, can produce either royalties or licensing fees. Microsoft, in particular, is not known for making agreements in which the other party retains proprietary rights.
The contracts with companies such as Nokia and Seiko-Epson might produce some licensing revenue, but it isn't clear to me that the contracts are written in such a way to allow that outcome.
The web TV business again may create a climate where SPYG could receive continuing licensing fees, but I haven't seen anything in company press releases to this effect, nor have I received that impression from the conversation I had last week with Vilchik. After all is said and done, what's on paper are some potentially lucrative consulting contracts, and I see no other sources of income or cash flow.
If this is the case (that future income will come mainly from consulting contracts), then I would want to value the company differently from other software providers who retain proprietary control over their products. Offhand, I'd put the difference between the two types of companies at about 3 to 1; in other words, for similar earnings per share, I'd value proprietary technology at about 3 times the value of consulting services. That would still give SPYG a value edge over PHCM!
Art Bechhoefer |
