TTPCom clinches key $23m deal and reverses share price slide
TTP Communications plc (TTC.L) has finally completed the deal whose delay hit 2005/06 earnings and spooked the stock market six weeks ago.
The company said today that prime operating subsidiary TTPCom Ltd, which develops intellectual property (IP) used in wireless communication terminals, had signed an agreement worth $23m with long-time collaborator US-based Analog Devices Inc. The deal will see the transfer to ADI of IP and engineering resources to support and customize TTPCom GSM/GPRS/EDGE modem software for use on ADI products.
ADI provides data conversion and signal conditioning technology to over 60,000 customers, representing all types of electronic equipment.
TTP Comm managing director Tony Milbourn (pictured) said the agreement "is the transaction that we hoped to complete in our previous financial year. It represents the next step in our relationship - it allows ADI more freedom to close and support deals directly with the end customer, and it allows TTPCom more freedom to get maximum reuse from our software."
Share price gains
The stock market liked the news, pushing TTP Comm shares up 20%, or 2.75p, to 16.25p by midday. But they have a lot of ground to make up. They have been in steady decline as the company has variously grappled with the impact of SARS (over half is business is in Asia) and slow uptake of 3G in mobile phones. Last year the share price lost 59%, with TP Comm sliding from being a plus £100m company to being worth £37m now.
In March, the company said talks on deal for a major contract - which turned out to be the one with Analog - had been extended and as a result previously projected revenue in the second half of the financial year to end March would be lower and reaching operating break even would be delayed. That news saw the share price shed 27%.
TP Comm last made a profit in 2002/03 and consensus forecasts suggest break even will now be reached in the current financial year ending in March 2007.
The agreement grants ADI the right to directly distribute TTPCom's modem software for use on ADI SoftFone baseband products and provides development rights for AJAR, TTPCom's advanced applications platform. The deal simplifies wireless device development for customers by consolidating the resources involved in the licensing and customization of Softfone-based hardware and software at one company, ADI.
The value of the agreement is around $23m payable in cash, of which $11m will be paid at closing and the rest paid after certain technical milestones are reached. Closing is expected to occur within four to six weeks.
Repositioning
Mr Milbourn said the agreement was "an important first step in repositioning our business. It allows ADI to sublicense our protocol software directly to customers using their chipsets, bringing our relationship with ADI into alignment with how we operate with our other silicon partners, where our protocol software is increasingly delivered to market under sublicense arrangements together with our partner's chipsets".
He said that in the Applications arena, AJAR sold direct to handset vendors building on the company's extensive knowledge of the inter-relationships between chipsets, protocol stacks and applications.
TTPCom says it has established a world leading position with its GPRS, EDGE and 3G protocol stack software, offers rapid customisation of handsets through its AJAR applications framework, and develops both radio and baseband cellular software engines through its Macro products. More than 150 million devices using TTPCom technology have been shipped worldwide.
"We continue to review the strategic options available to ensure that TTPCom is able to exploit the market opportunities available, and has the necessary funding required to do so", he said. There will be more details on its plans when preliminary results for the year ended 31 March are released at the end of May.
3rd May 2006
