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Chip technology developer Tessera Technologies Inc. (TSRA - Analyst Report) recently announced that its subsidiaries Tessera, Inc. and Invensas Corporation each signed a patent licensing agreement with SK hynix Inc. for an undisclosed sum. Per the terms of the agreement, SK hynix can use Tessera Inc. and Invensas Corporation patent portfolios for eight years.

Though the companies did not disclose the specific financial terms, Tessera will receive a one-time payment and running royalty payments. This deal will increase recurring royalty revenues for Tessera beginning from the second quarter, as the company reports royalties one quarter in arrears. Apart from this deal, Tessera and SK hynix have also agreed to dismiss the antitrust lawsuit pending in a California state court.

SK hynix Inc. is a South Korean memory semiconductor supplier of dynamic random access memory (DRAM) chips and flash memory chips. It is the world's second-largest memory chipmaker after Samsung Electronics and the world's sixth-largest semiconductor company.

We believe that the association with SK hynix Inc. will support Tessera’s fundamentals for the upcoming quarters. Such deals will increase recurring royalties for the company, giving it more financial strength to invest in attractive growth opportunities through the economic cycle.

Tessera is a provider of backend technology for semiconductor manufacturing. It operates in two segments, Intellectual Property and DigitalOptics. The Intellectual Property (IP) business generates revenue from manufacturers that use its patented ideas, while DigitalOptics’ miniaturized camera module solutions provide cost-effective and high-quality camera features.

The company posted decent third quarter results, with earnings of 5 cents beating the Zacks Consensus Estimate by 3 cents. Revenues of $72.7 million jumped both sequentially as well as from the year-ago quarter. Tessera has a strong balance sheet, with $465.9 million in cash and short-term investments and no debt.

Currently, Tessera has a Zacks #3 Rank (Hold). Its rival Amkor Technology, Inc. (AMKR) carries a Zacks #3 Rank (Hold), while Advanced Semiconductor Engineering Inc. (ASX - Snapshot Report) carries a Zacks #2 Rank (Buy).

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