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VirnetX Stock Jumps after Apple Payout, What’s Next for the Company?

20 Jan VirnetX Stock Jumps after Apple Payout, What’s Next for the Company?

VirnetX Holding (NYSE: VHC), a Company developing leading-edge solutions and technology for internet security, announced the receipt of $502.8 million and the grant of its motion for pre-trial and post-trial interest, supplemental damages, costs, and ongoing royalty of a rate set at $0.84 per infringing iPhone, iPad and Mac products, as part of the final judgement in its ongoing patent infringement action against Apple Inc (NASDAQ: AAPL).

The Company’s dispute with Apple dates back to 2010 and pertain to two network security patents dealing with virtual private networks (VPNs) and secure communications links, VirnetX US Patents No. 6,502,135 and No. 7,490,151, claimed to be used in its FaceTime and VPN on Demand features. Apple had earlier paid the Company $454,033,859 in a separate case in March 2020, and has also been awarded damages of $0.84 per accused device on over 598,629,580 infringing units from US sales only.

VirnetX was formed by a team of former scientists from the SAIC (Science Applications International Corporation) and has products such as Gabriel Collaboration Suite (secure communication solutions), Gabriel Secure Gateway and technology platforms namely Gabriel Secure Domains and Gabriel Secure Communication platform, which it licenses to other companies for integration into their own product offerings. The Company’s list of clients includes Microsoft (NASDAQ: MSFT), Aastra, Mitel, NEC, Siemens and Avaya (NYSE: AVYA).

VirnetX Holding (NYSE: VHC)

Market Cap: $374.48M; Current Share Price: 5.27 USDChart
Data by YCharts

Industry
IoT solutions are becoming extremely crucial as more and more devices use the internet to stay connected and store information online. According to an estimate by MarketsandMarkets, by 2020 there would be over 25 billion IoT connections and this offers a significant opportunity for organizations to improve the delivery of their products and services. The rapid adaptation of IoT is changing the manner in which business operate by not only improving outcomes but also reducing costs, time and enhancing efficiency and security.

According to the same report, the global market for IoT solutions and services will reach USD 278.9 billion by 2024, growing at a CAGR of 14.9%, from USD 139.3 billion in 2019, driven by the rapid advancements in wireless technology and increasing decentralization. Companies are increasingly looking at IoT solutions for security, device management, application support and providing services such as real-time monitoring, customized alerts and notifications and access to cloud services. The technology is of particular interest to companies in areas such as manufacturing and transportation as it allows for remote monitoring, predictive maintenance and real-time data analytics.

The growth in the market will be fuelled by the growing demand for internet of thing devices that are interconnected such as connected cars, smart cities, wearable devices, smart homes to name a few. The services rendered encompass areas such as identity access management, security analytics, application and endpoint security and intrusion detection and prevention. The technology finds application in a wide variety of industries ranging from automotive, healthcare, banking and financial services and Insurance.

Furthermore the industry is constantly evolving and adopting new technology to ensure that it offers the best security and networking facilities available. BlockChain, Artificial Intelligence and Machine Learning are the current buzzwords in the world of IoT security, with more and more companies realizing the need for an immutable decentralized record of transactions that can offer enhanced safety, performance and efficiency.

Company
VirnetX aim is to facilitate secure real-time communication over the internet by developing cutting-edge security solutions. The Gabriel Secure Communication platform enables organizations to work remotely, provides scalability and secures data through a suite of tools such as messaging, mail, sync, voice and share functions. In addition, its gateway provides seamless protection for cloud apps and infrastructure, and allows for users to choose domain names of their choice. Furthermore its secure communication platform allows for private encrypted networks through use of VPN services and also provides connection infrastructure.

The Company also offers technology licenses through Gabriel Connection Technology™ Software Development Kit (SDK) that enables rapid integration with existing software, without the need for complex and costly code changes. The kit consists of software for relay server, connection server, registrar server, object libraries, sample code among others, to enable customers to adopt the technology and establish a secure communication network. The customers are required to pay an initial license fee and a subsequent loyalty fee for every product that contains the code module.

VirnetX has built a robust patent portfolio containing over 80 U.S. and international patents, in addition to over 100 patents pending worldwide covering areas such as dynamic VPN address allocation, agile network protocol for secure communications using secure domain names, user authenticated encrypted communication link to name a few.

The Way Forward

  • VirnetX is actively pursuing partnerships in wide range of verticals such as government, healthcare and finance to increase its enterprise customer base. The Company’s software has currently been deployed by numerous International Association of Certified ISAO (IACI) such as Maritime & Port, Credit Union, Human Trafficking and the City of Chicago and is being evaluated by several others for deployment in their network.
  • The Company has identified certain patents and patent applications, which it intends to make available through a non-exclusive patent license to the 3rd Generation Partnership Project, or 3GPP. VirnetX believes that these patents will be essential for the development of 3GPP LTE, Systems Architecture Evolution, or SAE project. This will enable the company to license its security patents in exchange for compensation, to members desirous of implementing its technical specifications, for developing 5G and 4G/LTE Advanced devices and solutions.
  • The Company is expanding into the Japanese market through its Japanese subsidiary, VirnetX KK and has recently appointed Darl McBride as Chief Operating Officer (COO). VirnetX will be working with IP Dream, a Japanese based strategic technology distributor and service provider and other established Japanese relationships.
  • As per its Q3,2020 financial results, the Company had cash and cash equivalents totaled approximately $225,911 and our short-term investments totaled approximately $22,077, which it believes is sufficient to fund its operational expenses and working capital for the foreseeable future. Going forward the Company expects majority of revenue to come from license fees and royalties from its suite of products in the markets across the world as well as the U.S.
  • The Company has sometimes been referred to as a patent troll due to its patent litigations. These legal tussles involve considerable expenses, time and management resources and the outcome is uncertain and involves lot of risk. The Company may fail to obtain positive rulings or may be exposed to claims and sanctions which result in losses and other unfavorable consequences.
  • Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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    References

    https://www.marketsandmarkets.com/Market-Reports/iot-solutions-and-services-market-120466720.html

    https://virnetx.com/press/virnetx-receives-5028-million-plus-interest-supplemental-damages/

    https://appleinsider.com/articles/20/03/13/virnetx-versus-apple-saga-over-with-454m-payment-for-patent-infringement-paid

    https://virnetx.com/press/virnetx-hires-chief-operating-officer-for-japan-licensing/

    https://ir.virnetx.com/static-files/cddb20a7-3111-4d88-aa36-33f397ceab03

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