Tessera Technology, Inc. (TSRA) has advanced packaging technologies with industry-wide application. September quarter top-line results beat consensus estimates while the bottom-line missed.

Revenue for the period was $63.5 million, up 13.3% sequentially, and up 29.1% year-over-year. Strong demand for cell phones in emerging markets and greater numbers of smart phone shipments continued in the industry's third quarter. As the firm recognizes recurring royalties one quarter in arrears, those shipments will drive the underlying growth in TSRA's fourth quarter royalty and license fees.

Looking ahead, Tessera expects fourth quarter total revenue to be within the range of $60 million to $62 million. The licensing business has very attractive operating leverage characteristics. The firm has won five major lawsuits and now receives royalties from all of the big four in the DRAM market. Royalty and license fees are expected to range between $53 million and $55 million. Product and service revenue is expected to be approximately $7 million.

The firm recently suffered its first legal setback as an International Trade Commission judge stayed the company's patent infringement motion against Motorola (MOT), Freescale, and Qualcomm (QCOM). This will not affect the top or bottom-line. We continue to rate shares of TSRA a Buy.