Hey guys. Recently, I came to notice this company. RPX Corp (Ticker: RPXC). In short, they do patent risk management and I believe they are the only one in the space. This company seems to have tremendous potential as it seems that it can benefit greatly from economic of scale. Revenue growth has exceeded COGS growth and I can see why given the nature of the business. Extrapolating revenue growth and COGS forward, I can see profit margin expand tremendously and I believe this post a great opportunity.
HOWEVER, there are some concerns that I wish to address and I am wondering if fellow monkeys would be able to assist me.
1) While I guess I get the gist of the business, it is still speculation. I still do not have a clear understanding of what the business does.
2) While it is true that they are the first in the business, the company doesn't seems to have a moat around the business and is liable to have its growth cut if new entrant enter the market.
3) Does potential future litigation post a great risk to the business? Imagine Apple sue the company. If that is so, current profit margin is just an illusion as they are merely deferring potential losses into the future. At least this is how I understand the business.