Why Tessera Technologies (TSRA) Is Down Today

Update (4:35 p.m. EST): Updated with closing price, day high and low prices, price change and volume information.

NEW YORK (TheStreet) -- Tessera Technologies  (TSRA) dropped 8.38% to $17.92, down $1.64 from its previous close of $19.56, at the close of the trading day on Thursday after the company announced it would cease remaining operations at its DigitalOptics business to instead focus on earning money from its other technologies.

The stock had a volume of 1,796,156, more than four times its average of 420,276. It hit a high of $18.42 and a low of $17.60 for the day.

The San Jose-based company decided to end operations at DigitalOptics, which makes camera parts for smartphones, in order to focus on main operations, bring down operating costs and increase profitability. The move should lead to restructuring and impairment charges of $50 million to $55 million. Approximately 75% of those charges will take effect in the company's fourth quarter, while the rest will take effect in the first half of 2014. Tessera expects its quarterly DigitalOptics-related operating expenses to decline by approximately $17 million, which should be realized in full by the third quarter of 2014. 

Chief Executive Officer Tom Lacey said in a company statement that Tessera would continue to run its image enhancement business while it explores new ways to earn value from DigitalOptics' intellectual property portfolio. A sale or licensing agreement are two such options.

TheStreet Ratings team rates Tessera as a "Hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate TESSERA TECHNOLOGIES INC (TSRA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • TSRA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 11.54, which clearly demonstrates the ability to cover short-term cash needs.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
  • TSRA, with its decline in revenue, underperformed when compared the industry average of 9.7%. Since the same quarter one year prior, revenues fell by 38.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, TESSERA TECHNOLOGIES INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$19.92 million or 980.50% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: TSRA Ratings Report

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