Tessera Technologies Annual Meeting (2010)

I attended Tessera Technologies' (TSRA) annual shareholder meeting today in San Jose, California. Tessera has acquired various companies and has about 470 employees, with many of them in Charlotte, North Carolina. About 25 people--but only two non-employees--attended the meeting. The company offered shareholders scones, coffee, juice, and various pastries.

CEO Henry R. Nothhaft handled most of the meeting with Bernard J. Cassidy. Mr. Nothhaft introduced the board members, handled the formal portion of the meeting, and then adjourned. Since there were only two non-employees present, the company chose not to present a video; instead, the CEO agreed to talk with me and the other shareholder and answer our questions.

CEO Nothhaft explained that his company's products go into most consumer electronics products, such as PCs, cell phones, and LCD televisions. Tessera has a semiconductor-related business and an Imaging and Optics business. On the semiconductor side, Tessera's technology connects the IC chip to the motherboard. It sounds simple, but consumer products are getting smaller every year, which means that motherboards and their components also have to become smaller.

Tessera's problem is protecting its IP. As more products are made in Asia, the legal framework and culture isn't necessarily conducive to an American company collecting royalties through patent litigation. CEO Nothhaft talked about Tessera's "carrot licensing program," where the company offers incentives to work with Tessera and to pay royalties. Overall, however, Tessera wants to become part of the supply chain in Asia so it can get paid at the time someone uses or buys its products. CEO Nothhaft described the IP issue "like solving a puzzle." He says he wants Tessera to "compete in the domestic Chinese market" for consumer electronics. To that end, Tessera has hired CTO Robert Yung. It has also signed up three new licensees in the China for its imaging/optics products. China currently represents about 20% of the consumer electronics market, and its share of the market continues to grow.

CEO Nothhaft also said that "incremental innovation occurs in the factory." He didn't expand on this concept, but I think he meant that outsourcing manufacturing and distribution may cut costs, but retaining domestic manufacturing allows a company greater protection over its IP and also allows it to work with employees to improve products.

CEO Nothhaft said that Tessera "firmly believes in the patent system" and called the patent one of the "greatest job creation tools." He said he hopes that other Asian nations will emulate Japan and its gradual respect for IP rights. CEO Nothhaft seemed excited about Tessera's optics/imaging business, saying he foresees "rapid growth" in products that use enhancing images, "smart camera modules," and facial detection. Such features could be used for surveillance, in automobiles, gaming (e.g., gesture control, Wii), and toys (e.g., a toy could detect a smile and respond).

If you read Tessera's s 10K, you will see numerous cases involving patent litigation. It seems as if a large chunk of Tessera's future revenue growth depends on its ability to navigate various Asian legal systems. Tessera's real value is in its 1900+ patents, but without a legal system in place to enforce those patents, one wonders how successful Tessera will be as more and more manufacturing is outsourced.

Disclosure: I own an insignificant number of Tessera (TSRA) shares and do not anticipate buying more shares. I am starting to fully understand why Warren Buffett avoids technology companies. Even if a tech company has great products, there are so many other factors involved in getting that technology to generate a consistent revenue stream.

Note: regarding Tessera's unique name: in 1992, Tessera was renamed from IST Associates--named for founders, Igor Khandros, Scott Ehrenberg and Tom DiStefano--to Tessera, the Latin word for "tile," for the closely stacked packaged chips that resemble a tile mosaic.

San Jose's Sam Liccardo: a Great Guy

I saw Sam Liccardo recently at an event in San Jose's Japantown. Sam is a Harvard Law graduate, former D.A., and current City Councilmember. San Jose is lucky to have him. When he is termed out of the City Council (in 2014?), many people expect he will run for San Jose's mayor position and win.

San Jose Water Company Annual Meeting (2010)

San Jose Water Company (SJW) had its 2010 annual meeting on April 28 in downtown San Jose. Pastries and coffee were offered to shareholders (see picture above). About 30 people attended, mostly company employees. Unfortunately, Norman Mineta, one of the Board members, did not attend because he was busy in China. Only one out of the eight directors attending the meeting was female.

Chairman Charles Toeniskoetter handled most of the meeting and congratulated an employee for 20 years of service. The CEO gave a brief presentation and said that the company was doing well but had "some political things to get through." (Last year, the company also complained about the political environment, but it hasn't been very specific about the political issues they are having.)

I skimmed the 10K and noticed that SJW owns a lot of land and real property. I also noticed that SJW has set up a subsidiary, SJW Land Company, "which has a 70% limited partnership interest in 444 West Santa Clara Street, L.P., a real estate limited partnership that owns and operates an office building." (page 15, 10K)

Guess who owns the other 30% of 444 West Santa Clara Street, L.P.? "A real estate development firm, which is partially owned by the Chairman of the Board of SJW Corp." (page 34, 10K) The tenants are "an international real estate firm under a 12-year lease." (Id.)

Visions of Enron-style subsidiaries flashed through my mind, so I had to ask about the limited partnership. I mentioned the Chairman's interest in the subsidiary and questioned why a water company was in the landlord/land business. The Chairman said that SJW Land Company took "land no longer needed for the utility and put it into the Land Company." He said that SJW has been in "the real estate business" for a long time, and it has been successful in that business.

The Chairman never mentioned any potential conflict of interest in owning property with SJW. It would have been nice if the Chairman told shareholders that he recuses himself from decisions involving SJW Land Company, but I didn't want to press the issue. I asked about the pension plan. The CFO said it was "90% funded" per IRS rules. The meeting concluded thereafter.

I hope to see Mr. Mineta at next year's meeting. I wanted to ask him about a story involving a baseball bat signed by Hank Aaron and Sadaharu Oh, the home-run king of Japan. See here ("The Camps at Home," 3/8/1999) for more on this story.

Disclosure: at this time, I own an insignificant number of shares of San Jose Water Company (SJW).

Anthony Bourdain's Favorite Food: Pho

Click HERE to read a review of a 2009 Bourdain speech.

Robert Half International Annual Meeting (2010)

Robert Half International (RHI) held its annual meeting in Millbrae, California at the Westin Hotel. Approximately 40 people attended the meeting. Unfortunately, I attended the meeting late and missed the video presentation and most of CEO Harold Messmer's short speech. However, a very perceptive and kind employee saw me come in late and allowed me to watch the video privately. The video, shown to shareholders and employees, discussed Robert Half's various businesses. RHI assists companies by providing flexible staffing. It is increasing its focus on small to mid-size businesses and believes the healthcare industry will represent increased flexible staffing demands. I was surprised by the diversity of RHI's businesses--RHI owns Accountemps, Finance and Accounting, Officeteam, Protiviti, and other staffing segments.

One segment of the video talked about "PEARL" (Pillsbury’s E-Discovery Alliance of Resource Leaders), an e-discovery service. For more information, click here. Law firms may be interested in such a program, assuming it is cheaper than hiring a temp legal agency (a service Robert Half Legal also offers).

The video also mentioned RHI's cash position of $349 million, with very little debt.

Everyone at the meeting was open and friendly. The hotel offered fruits, cereal, different juices, coffee, pastries, yogurt, and even a security guard outside the meeting hall. The CEO agreed to take a picture with me, and he didn't spend any time checking to see if it was a good picture (even after I told him it would be on my blog). Many executives are self-conscious, but CEO Messmer comes across as both suave and down-to-earth.

Now, I have to take time off work and sometimes drive moderate distances to come to annual meetings, so I get disappointed if there is no presentation or if the meeting is poorly run. When a company has a well-run meeting, like RHI, it makes me more confident as a shareholder and more likely to hold my shares.

Also, companies that offer shareholders goodies at the annual meeting get extra points in my book, because they are savvy enough to get free advertising. (It doesn't hurt to butter up shareholders, either.) The first picture above shows you all the different items I picked up at the meeting. RHI offered shareholders golf balls, different mugs, a stress ball, a hat, and a notebook. All of the items were branded, which gave the company a chance to show off its various businesses. Kudos to RHI for running a professional meeting and for treating shareholders to a fun morning.

Disclosure: I own an insignificant number of RHI shares.

Faisal Shahzad and Terrorism

From this Guardian story: would-be Times Square terrorist Faisal Shahzad "came from a wealthy family. He earned an MBA. He had a well-educated wife and two kids and owned a house in a middle-class Connecticut suburb." 

Shahzad fits the profile of a terrorist, and it has nothing to do with race, ethnicity, or religion. If you haven't read my thesis on how to find the most likely terrorists, you can read it HERE.

Comments from Santa Clara County Judges on Law and Motion

From last night's Santa Clara County Bar Association seminar:

On motions: "Brevity is beautiful."

On ex parte motions: "Your procrastination is not our emergency."

On disputes between lawyers: The basic concept is, "Don't involve the court." [i.e., do your best to work things out]

On how to begin your motion: the first paragraph should tell the court why you are here and what you want the court to do.