I have been following the press releases of PTSC in recent times.  I
realize that it is OTC BB, but it seems as if they are getting some
big wins on their patent portfolio.  I have seen an investment firm
post a target price of 0.75.  Does this seem realizable?  I am also
wondering what the long term future will hold for this company.  Is it
possible that we could see this stock make it into the multi-dollar
range?

Just a discussion starting point.

I'd have to say a price target of .75 cents is reasonable, but this is
a small cap stock that posts a small dividend.  Despite the dividend
though, I feel as if the stock is still in growth mode considering
they are picking up new patents and trying to get more companies
involved with their current patented work.  Not to mention they got
that new big head on the board, and the CFO keeps making appearances
promoting the stock.  We'll have to wait for new quarterly's to see
how interested wall street is.

I'd say the multi-dollar range is nothing out of the ordinary, I have
a couple hundred invested just to see if it'll take off.  The stock
doesn't seem to risky either considering it's financials, it's not
going under that's for sure.  They have positive net income and cash
flow and a good asset:liability ratio (as you'd expect from someone in
the business of holding intangibles).  I'm going long on them.

Glad to see someone else with an interest in the company : ).

I think PTSC is a dividend play, though there's an excellent chance
for growth.  Reuters rates Patriot Scientific Corporation (PTSC) as an
"Outperform", which is up from a "Hold" at the end of July 2007.

PTSC is a "cash machine".  It co-owns and licenses its patents for the
design of microprocessor chips in partnership with another
Intellectual Property overseer.  Lots of other users already
incorporate PTSC's proprietary elements:  they either pay up for a
license, or PTSC sues.

As the licensee lineup has increased, so has PTSC's cash hoard.  It
has $21.6 million cash on hand (that's $.055/share) and no debt.  It
doesn't really "make" anything, but money:  no stores, machinery, only
19 employees, and no infrastructure to depreciate.  They are chugging
along at a rate that suggests they will have $.08-$.09/share in cash
by the end of 2007, i.e., the net income is really flooding them!

As a dividend play, in 2006 PTSC paid out $.06, which is probably why
the stock was in the $1.00/share range (it hit $1.69, but has been a
slow loser since then).

So far this year, they've paid out only $.02.  If that's all they do
in 2007, that's about a 4.2% dividend yield and the share price will
go nowhere.

But PTSC just announced that dividend determinations will be made semi-
annually.  So, in October 2007, they should announce what they will
pay out next.  My guess is that PTSC will part with $.02/share of the
$.055+/share cash they have accumulated by that time.  If there is no
price change, that's a yield close to 8.5%.

Since last year, shares have fallen back to the $0.45 - $0.50/share
range.  So the key to PTSC share price is to guess what happens with
all the cash they generate.  PTSC just recently started paying taxes,
slowing growth in shareholder equity per share ... which is still up a
whopping 86% YOY.  Whether they use their cash wisely is the question.

I think that, if the semi-annual dividend goes up to $.025 - meaning
$0.05/share/year - the price will rise to $0.59/share.  That's 25%
share appreciation, plus an 8.5% yield.  Seems pretty sweet to me!

Dave

Those are great remarks in both cases and I appreciate it.  I was
looking at the dividends of the stock as a side note, but my primary
interest was in share appreciation.  I like the odds of a cash making
machine, so I went ahead and purchased a chunk of shares.  (I am still
kicking myself for not picking up Mastercard at 40.)

Dan

Letter to Shareholders from Jim Turley, CEO of Patriot Scientific / No
dividends this time

To All Friends of Patriot Scientific Corporation,

August was a good month for Patriot, but more than that, it was a
record-breaking year! We released fantastic annual results, appointed
a new board member, and opened a new publicity channel.

We had terrific year-end results - the best in Patriot's 20-year
history. Our top-line "sales" for fiscal 2007 nearly doubled to $49
million. (Technically, our sales include only our microprocessor chips
and the products from Holocom. Most of our income is actually
recognized through our equity stake in the joint venture through which
we license our patents. It's just one of those funny accounting rules.
Thank you, Mr. Sarbanes and Mr. Oxley.) Our net profit was $23.7
million, or $0.06 per fully diluted share. Obviously, Patriot
Scientific is enormously profitable and we're growing rapidly.
Our cash position has also improved hugely over the previous fiscal
year, growing by a factor of nearly 5x. We now have over $21 million
in the bank, compared to just under $4 million this time last year.
That puts us in a much stronger position to acquire other companies,
technologies, rights, or equipment.
Regarding our cash, I met recently with the board of directors and we
decided not to pay out a dividend this period. We'll revisit this
issue regularly but for now I think we can put that cash to much
better use in growing the company, as I hope to show you later this
year.
With our patent licensing activity running at the rate of about one
new licensee every month, and with more than 300 potential licensees
officially notified, we've got every reason for optimism. We've got
many years of licensing deals and revenue ahead of us.
So why isn't the share price doing better? I get a lot of letters from
shareholders asking, "Why didn't you raise the share price this
morning?" If only it were that easy. You know, I sometimes wonder if
these people understand how free markets work. To borrow a phrase from
the 19th century scientist Charles Babbage, "I am not rightly able to
apprehend the kind of confusion of ideas that could provoke such a
question."  Share prices are controlled by supply and demand, not some
big red button in my office.
Nick Tredennick has joined our board of directors. As I hinted in our
last letter, I'm thrilled that Nick has found the time to join us.
I've known Nick for a number of years and I admire his balance of
technological know-how and business sense. He also has an eye for
spotting trends, which brought him together with George Gilder many
years ago to write Dynamic Silicon and the Gilder Technology Report
and to participate in the Telecosm tech-investor conferences. Nick's
going to review the acquisition candidates we're evaluating and
recommend some ideas of his own. His industry knowledge, corporate
experience, and nose for good (and bad) investments will really work
in our favor.
I'm now writing a regular monthly column for Electronic Business that
starts this month. This is a widely distributed electronic newsletter
published by Reed Elsevier alongside big industry magazines like
Electronic News and EDN (Electronic Design News). In addition to
spreading the word about Patriot Scientific I'll be writing about the
intellectual property business, industry climate, business models, and
related topics of the day.
You may be getting a tax refund. As you know, we paid two dividends
during calendar year 2006, and you will have received a Form 1099 that
declared those dividends as taxable income. They actually weren't
taxable, and we sent out corrected 1099s, but some of you didn't
receive them. We've sent out the corrected form yet again, but just in
case you still don't receive it we've posted more information here.
Mark your calendars for our next shareholders' meeting on Tuesday, the
23rd of October. As before, we'll hold the meeting at the La Costa
Resort & Spa here in Carlsbad. Everyone's welcome and you can find
information on travel and hotels on our Web site.
With best regards for a good and profitable summer;

-Jim Turley

President/CEO

Patriot Scientific Corporation

He also just announced at the ARCH investment conference that Patriot
will be looking to make some acquisitions.  He said that they will be
in the software/microprocessor arena, staying with their technological
roots.

They also just hit the 52 week low... and like I previously said I
don't think they're going anywhere anytime soon.  However, if you're
playing this as a dividend play, I doubt they'll announce anything
above 2 cents given they want to take that income/cash and move it
into M&A.

If someone can pull up the transcript from the conference today and
post it that'd be grand : )

http://www.tiny.cc/m9YjE

Oops!

PTSC a "dividend play"?  Based on Turley's letter to shareholders, it
looks like he wants to let the cash pile up to make a new acquisition
to run in 2015 and beyond.

If this leads to a pop in the share price when the announcement comes,
that's okay with me.  Also interesting that past dividends have been
recharacterized as a return of equity.   I didn't invest in PTSC to
have them spoon money back to me from what I put up.  Whether it's
share appreciation or REAL dividends, I don't care.

The presentation made yesterday had much better PP slides and Turley
was enthusiastic and enlightening.  Unfortunately, I didn't save the
site address and it isn't on PTSC's website.  The big news is that 300
more potential licensees have been notified of PTSC patents, so the
21-22 that have already recognized it is just a drop in the bucket.

Meaning buckets of revenues coming in.  I still feel shareholder
interests will be represented, so the stock price will press on toward
$1.00/share, regardless of dividends.

Dave

Dan, I would suggest you read some of the posts from the Agoracom.com
message board.  There are some very knowledgeable posters who have
been invested with this company for years.  I have been in since Feb
06' and recently attended the Apr 07' shareholders meeting.  You
should attend the Oct 23, 2007 SHM too.  You will be VERY impressed by
our partners with the patent portfolio, TPL.  Here's a rundown of our
past signings, not including our past 2 licensees (LEGO,DMP).
http://investorshub.advfn.com/boards/read_msg.asp?message_id=21690699
Good luck.

C O M P A N Y I N T E R V I E W

Patriot Scientific Corporation (PTSC)

TWST: What is Patriot Scientific Corporation?

Mr. Turley: Patriot Scientific is a high-tech
company outside of San Diego that's been around
for 20 years. We are a publicly held high-tech company
and like most high-tech firms that are 20 years
old, we have developed a number of different products,
including radar technology, communication
equipment and ISDN technology. More recently the
company developed a 32-bit microprocessor chip
that we sold through the 1990s and in the early part
of this decade. The chip was very innovative and
sold reasonably well; in fact, we still sell the chip to
this day. But something that came out of that chip
development is that we were granted a handful of
patents on some of the technologies that fit into the
chip and, much to our surprise and delight, those
patents turned out to be enormously valuable and
helpful to us and to the market at large.
So, for the last couple of years, since the
summer of 2005, we have been offering those
patents under license to pretty much every chip
and microprocessor company in the world. It's
been enormously successful for us and in the span
of just two years, we have already licensed 21
companies to our patents and we have a list of literally
more than 300 companies still to go.

TWST: Give us an idea of the overall platform. Is it relying on the
one set of technology or is there additional development going on?

Mr. Turley: The patents were granted just
a few years ago during the development of our microprocessor
chip, and they have many years left
to go. The patents expire around 2015, so we've
got a long road ahead of us. There is a portfolio of
the patents; that is, we license them as a bundle
rather than having people pick and choose which
of the patents is applicable for their product. We
say, "You know what? Just take the whole bundle
at once and that way your full product line is covered
moving ahead and backward." So we license
the portfolio of patents and they apply to pretty
much every microprocessor chip made.
It's pretty boring to list details of a patent but
broadly speaking, they enable technologies to make
the chips run faster, which of course is something
everybody wants to do. The patents also cover ways
to save energy and use less electricity, which, again,
is something everybody wants to do. In our analysis,
we've discovered that nearly every chip company
in the world is making use of this technology
and therefore it is an ideal patent licensee.

TWST: You are saying risk of obsolescence is not near term?

Mr. Turley: No. We are not even halfway
through the life of these patents. We are licensing
firms at the rate of about one a month; as I said,
we've got 21 licensees so far; companies like Intel
and AMD took licenses early on. Hewlett-Packard
is a licensee. Companies like Casio, Pentax, Fujitsu,
Nikon, Lexmark - the list goes on and on. These
are big companies that are using Patriot Scientific's
technologies in just about every conceivable type of
product from computers to digital cameras to photocopiers
-    it can be almost anything.

TWST: What's the drag as far as signing companies? Is it simply
balancing your esources against the deals to be made? Are there ways
to speed up the process? Does it just have its own timing?

Mr. Turley: It's a little bit of both.
Although we are really happy with the rate at
which we have been signing licenses, of course
we prefer it to be faster. With 300 plus companies
still to go, I'm going to die an old man before I
can sign all of them at this rate. So having said
that, we are happy with the rate, but I would prefer
it to be quicker.
The drag initially was that people just
didn't realize that they were using technology.
There is fair amount of education involved in
showing people that, "gee, you are using this
technology, you've put it in your products and
they are working very well, but golly, we invented
this a few years ago," and we so we offer
them an opportunity to purchase the patent portfolio.
There is some initial resistance up front
simply because people are not aware. We think
that awareness is going to pick up and we have
some evidence that the license rate is increasing.
Now that companies like Sony, AMD, Intel,
Hewlett-Packard and the others are taking licenses,
it's becoming clear to everybody else
that it is something they are going to need to do
in order to continue to innovate their own prod-
So we suspect that the wheels will start
turning a bit more quickly.

TWST: What's the financial snapshot of the company today - balance
sheet, P&L? What are the strengths? What items are you focused on for
improvement?

Mr. Turley: The company is doing fantastically
well. We just filed our 10-K for the fiscal
year 2007. It could hardly be any better. Our top
line is about $49 million. That's about double what
it was the year before that. The company has no
debt to speak of, no debt whatsoever. We bought
back outstanding warrants and reduced the overhang.
We are immensely profitable, as you might
expect, with $49 million in licensing revenue coming
in. We have got more than $20 million in cash
in the bank that we are ready to deploy to expand
the company in the future. And, again, we have
every expectation of more licensing revenue coming
in for many years. So the revenue, the cash
hoard, the shareholder equity, all of that looks like
it's going up and to the right in the future. It is
looking extremely good for us.

TWST: What models, what strategies have you looked at as faras use of
that cash? Obviously, the future business may be more dependent on how
well you steward as opposed to how well you license.

Mr. Turley: True enough, the licensing
has been very, very good for us in the last couple
of years and the company has even paid out cash
dividends, not once, not twice, but three times,
which almost never happens for a Pink Sheet
company such as ours. We've paid three dividends
to our long-time shareholders, which made
them extremely happy. Going forward, we may
do that again. But more than that, what I'm looking
for is to turn that cash hoard into investments.
What I would like to see Patriot Scientific do is
start developing new products and selling new
products into the market, whether that be software,
whether that be microprocessor chips
again, or whether that be black boxes that go into
the industrial, consumer or automotive markets. I
think we are going to invest that cash into R&D
or acquisitions or some combination of the two,
so that we return to being a product company in
the next 12 to 15 months.

TWST: What historically has been the shareholder base with the
company? Has that base undergone any recent changes?

Mr. Turley: It hasn't really. We are extremely
broad-based, with 16,000 shareholders,
none of whom holds more than about 8% of the
company. There are no major shareholders. There
is nobody with undue influence on the company.
It's spread out among retail shareholders, institutional
shareholders, private equity firms; it's all
across the map.

TWST: In your discussions with the investment community, are there any
recurring questions or misperceptions? Is the story understood?

Mr. Turley: Unfortunately, the story is not
very well understood, which is part of my job as
the President and chief communicator of the company,
to explain the fantastic opportunity we're sitting
on. The patents that the company holds are
fundamental to pretty much every sort of chip
making, and, as I said, many of the largest companies
out there have already purchased a license.
We've got hundreds to go; it's like holding a patent
to water. Everybody needs it, all we need is our
share, our recognition; it is something that the
company developed that we have a right to license.
Obviously, we are very happy to license it. We
don't litigate; we don't go around suing people for
using the technology. We'd much rather license
people in very friendly and open and businesslike
way. It's working for us very well. A lot of Patriot
Scientific's long-time shareholders get that, but
people who are new to the firm don't quite realize
what a gold mine the company is sitting on, how
fundamental our technology is, how vital our technology
is, and the enormous upside that is ahead of
us in licensing our technology to electronics companies
around the world.

TWST: Introduce us to your top-level management team, two or three of
your key individuals.

Mr. Turley: I'm Chief Executive; I have
been on board for the last three months. I succeeded
our previous Chief Executive, David Pohl. Our
Chief Financial Officer has been on board for a
couple of years and he has done a fantastic job of
righting the financial ship, as it were. We've gone
through Sarbanes-Oxley, Section 404, you name it.
We have the most fantastically squeaky-clean balance
sheet I have ever seen. If people are interested
in it, they can download the 10-K. Again, we have
no debt. The financial health of the company never
been better and we have our CFO and Controller to
thank for that. We have a very active Board of
Directors, people who have been with the company
for a long time. We have an Audit Committee, and
we have technology people. In fact, we just recently
appointed a new Board member. Dr. Nick
Tredennick from Silicon Valley has joined our
Board of Directors and he has a fantastic track
record in technology startups and technology investments,
and we are really, really pleased to have
him on board. With his guidance and the guidance
of the rest of Board, we are really looking forward
to the next phase in Patriot Scientific's growth.

TWST: At this point, what should investors focus on as we track and
assess your performance? Are there key metrics or events or
combinations to focus on? What should matter to the investor? What
matters to you?

Mr. Turley: Right now, I think the key
thing that investors focus on is new licensing revenue.
As I said, we have ...

read more »

Thanks for posting this.  It reaffirms his comment at arch but also
gives us an idea of how he answers investors questions about what the
"key metrics" are for this stock for the future.

I'm liking it all, hopefully we see it go somewhere.  The fact that
Dr. Nick
Tredennick is on the board gives me hope that in the M&A section
they'll make a smart move.

What's all this intellectual property (IP) stuff, anyway?

For the last decade or so, we've heard about IP creation, IP
protection, IP licensing, and IP companies. Is this really a new type
of business or a familiar business wrapped up in new jargon?

By Jim Turley, Patriot Scientific -- Electronic Business, 9/19/2007

We're totally buzzword-enabled. Nobody sells products anymore. We
"enable seamless methodology solutions targeted at attractive price
points."
Who writes this stuff, and when did we decide that talking like
lawyers or politicians was a good thing?
A case in point is "intellectual property," or IP. For the last decade
or so, we've heard about IP creation, IP protection, IP licensing, and
IP companies. Is this really a new type of business (oops, a "paradigm
shift"), or is it a more familiar business wrapped up in new jargon?
The good news is, it's the latter, and the concept is easy to
understand. Intellectual property has been around for a long time, and
we're all familiar with it, even if we don't always call it by its
currently fashionable moniker. In short, intellectual property is
knowledge, and IP licensing just means sharing what you know. Books,
music, teaching, art-they're all examples of IP. And the world would
be much poorer without them.
For a somewhat seamier example, IP licensing is a lot like the world's
oldest profession: You get to sell it and then turn around and sell it
again to someone else. There's no inventory, no cost of goods, and no
manufacturing. Unfortunately, the "product" depreciates rapidly and
many of your customers prefer that you don't mention their names. Yes,
indeed, it's a tried-and-true business model.

This same business model also works for software, music downloads,
movies, and most professional services. In all cases, you're selling a
valuable-but intangible-product. Plumbers and dentists certainly
provide useful services, but they don't generally leave behind a
material product, do they? You're paying for their time and expertise,
not the PVC pipe or the little roll of dental floss. Movies don't
leave a "residue," apart from good or bad memories. Same goes for
music, especially now that we download tunes and no longer get the
album covers or liner notes that once displayed our musical tastes to
friends and visitors.
In the electronics world, IP encompasses both software and hardware.
Software IP is easy to grok. We know we're paying for the bits on the
CD-ROM, not the plastic CD itself. The same software is equally
valuable, whether it comes on a CD, DVD, or floppy disk or as a
download (the ultimate intangible IP).
Hardware IP is a bit trickier. After all, hardware is, by definition,
a tangible product. But hardware schematics, Verilog, VHDL, test
vectors, and other bits of engineering effort all fall under the
rubric of intellectual property. You exert effort to create those
things, and you can share them with other engineers. Whether or not
you charge money for your schematics is another matter; you've created
something valuable either way.
Hardware engineers are like a team of architects. Architectural firms
create detailed blueprints for a building, but they don't actually
swing the hammers. Instead, the architects sell their plans to
construction firms that do the physical construction. The architects
get paid for their plans, and the builders get paid for their labors.
Everybody's happy.

Likewise, computer engineering firms can design chips (or boards, or
systems, or networks, and so on) and then sell those designs to the
folks who actually solder the devices together. This division of labor
allows everyone to specialize. The designers design, and the builders
build. The end customers don't know or care who, or how many people,
took part in developing their shiny new iPhone. All they know is that
they really like it.
The same goes for every other electronics product today. Cell phones,
antilock brakes, satellite-TV receivers, or TiVo boxes weren't all
developed by a single brilliant engineer. (And even if they were, that
person didn't actually solder together each TiVo that has gone out the
door.) We all build on the efforts of others; our "value add" is the
expertise we bring and not in reinventing the proverbial wheel.
The value of your efforts-your intellectual property-depends on a lot
of things, including the vagaries of market demand. Skill in designing
RS-232 interfaces might be valuable for a while but worthless later
on. If you've added a particularly brilliant bit of software to
generic hardware, you'll find a ready and willing market. Competition
and complexity are also factors.
Determining what your IP is worth is a tricky and inexact science-and
the topic of next month's article.