Graphic Evidence: Universal Display Shows Upside

by Paul Springer

Share prices of organic light-emitting diode (OLED) technology specialist Universal Display Corp. were up 15% to 24% at various times in high volume trading today.

The jump was substantial, especially for a company that has lost about $20 million in each of the last three years. Two related pieces of news were responsible for the increase. The company announced a licensing agreement with Samsung Electronics, and that in turn led to a ratings change from a Brigantine Advisors analyst.

According to a review of the Brigantine report in Barron’s, the analysis sees an overall increase in the use of OLED technology. As for Universal Display in particular, the analyst said, “new customer relationships will materialize in the next 6-12 months.”

The prospect of something that’s going to “materialize” sounds a little thin. Exactly how thin is tough to say. Reuters reports that terms of the agreements, one for licensing and one for sales, were not disclosed.

Investment bank Cowen also likes the deal, according to The Fly on the Wall, which provides a little more information:

Cowen said Universal Display’s strategic alliance with Samsung shows the value of its patents and technology and is a positive surprise since the deal is a fee payable as opposed to unit royalties, as expected. Shares are Outperform rated.

Universal Display has a lot of OLED patents. The Korea Times notes the benefit of the patents for Samsung: “The agreement is more than crucial for Samsung Mobile Display because the Nasdaq-listed UDC was holding more than 1,000 patents in phosphorescent materials, which are vital for organic LED or OLED screens.”

If OLED technology replaces LCDs, and if Samsung really needs those patents, Universal Display could thrive. Those are farily big “ifs,” and there’s one other. What if someone comes up with a way to make OLED screens without Universal Display’s patents?

Plenty of people are working on the technology, a source told The Korea Times:

“The developments could allow firms based in Asia, such as Samsung and LG, to manufacture OLEDs without having to pay royalties to UDC for materials used,” said a fund manager from a U.S.-based top-level investment bank in Seoul.

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