SANTA CRUZ — GraphOn, a small Santa Cruz company that develops business connectivity software, reported a precipitous drop in second quarter revenue of more than 35 percent compared to last year, largely related to a dive in income related to intellectual property licenses.
Second quarter revenue was about $2.12 million compared to $3.27 million in the same quarter of 2009. Total revenue in the first six months of this year has dropped more than $670,000, or 14.4 percent, compared to the same period in 2009. Net income was $96,200, or 0 cents per share, for the second quarter, compared to $473,100, or 1 cent per share, a year ago.
The 20-year-old company has been focusing on web-enabling applications for use and/or resale by vendors, corporations and government.
The company made “significant investments in intellectual property and have pursued various means of monetizing such investments,” according to a company statement filed with the Securities and Exchange Commission.
Efforts to enforce licenses, however, have triggered legal actions against GraphOn. This year companies including MySpace and Craigslist responded with federal court cases seeking legal determinations that they aren’t infringing on GraphOn patents.
The company said the high cost of patent litigation deterred it from filing new patent infringement litigation and attempting to seek license revenue.
Product licenses revenue from its Windows and Unix product lines
increased compared to sales last year, primarily due to the increasing inventory sale rate of certain resellers and increased orders overall. The company also earned more service fees related to handling more Windows maintenance contracts but saw a decrease in service fees related to Unix maintenance contracts primarily due to changes, the company said, by one significant customer and a lower licensing sales rate for Unix products.
“We expect these trends to continue throughout 2010, and that aggregate service fees for 2010 will approximate those for 2009,” the company said in its SEC filing.
On Thursday, shares closed at 7 cents, up 1 cent. The 52-week range is 4 to 15 cents.
This article was first published here.