Replies to post #332619 on InterDigital Inc (IDCC)

[techinvester]

Sources used for compelling reasons in previous post

1. LTE patent pool
• LTE percentage controlled
• http://connectedplanetonline.com/3g4g/news/intellectual-property-4g-0518/
• QCOM assertion of 47% of WCDMA patents
• http://www.thestalwart.com/the_stalwart/2006/09/qualcomm_patent.html
• QCOM bought Flarion to be a player in LTE (OFDM)
• http://connectedplanetonline.com/wireless/finance/qualcomm_flarion_acquisition/index.html
• See tutorial link below to understand how OFDM is integral to LTE)
• QCOM bought Airgo Networks to be a player in LTE (MIMO)
• http://www.wi-fiplanet.com/news/article.php/3646966
• 3G LTE Tutorial - 3GPP Long Term Evolution
• http://www.radio-electronics.com/info/cellulartelecomms/lte-long-term-evolution/3g-lte-basics.php
• Introduction to MIMO
• http://www.mimo.ucla.edu/summaries/INTRO_MIMO&OFDM.pdf

2. QCOM FRAND licensing rate
• Estimates 3G & 4G rates
• http://www.thestreet.com/story/10526160/1/tech-rumor-of-the-day-qualcomm.html?cm_ven=GOOGLEN
• QCOM LTE/WiMax PATENT LICENSING STATEMENT (December 2008)
• http://www.qualcomm.com/documents/files/ltewimax-patent-licensing-statement.pdf

3. Essential LTE patent pool controlled by QCOM
• Estimated # of essential patents by owner is subjective and varies by report
• http://connectedplanetonline.com/3g4g/news/intellectual-property-4g-0518/
• http://www.rcrwireless.com/ARTICLE/20100520/INFRASTRUCTURE/100529998/ltes-clouded-ipr-pool-expected-to-be-clearer-than-3g
• Source for essential pattern pie chart
• http://www.sonlte.com/2011/02/05/interesting-analysis-on-lte-patent-situation/
• Source for Ocean Tomo chart
• http://www.oceantomo.com/system/files/Nortel_PR_LandscapeMap.pdf

4. Eliminate IDCC as a competitor and aid industry consolidation
• http://www.sonlte.com/2011/02/05/interesting-analysis-on-lte-patent-situation/

5. Gain qualified industry recognized engineers to fulfill open QCOM engineering positions
• QCOM job search engine
• https://jobs.qualcomm.com/public/jobSearch.xhtml#messages
• Summary of IDCC engineering capabilities
• http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=IDCC.O
• Source for LTE RAN chart
• http://techipm-innovationfrontline.blogspot.com/2011/01/lte-ran-products-licensing-power.html

[patopinion]

Techinvester, good analysis. I see on a subsequent post that you included references for information used in your analysis. Following is a portion of one of the references that you used in your analysis. Of special note is the last sentence concerning the approximate rate of 3.25%, which could change due to patent acquisitions.

"Consistent with the industry-accepted principles of FRAND described above and the value of Qualcomm’s standards essential LTE and WiMax patent portfolios established through bilateral, arms-length negotiations culminating in Qualcomm’s existing LTE/WiMax license agreements, Qualcomm expects that it will charge royalties for a license under its standards essential LTE patents and/or standards essential WiMax patents for complete, end user subscriber devices that implement LTE and/or WiMax standards, but do not implement any 3G CDMA standards, of approximately 3.25% of the wholesale selling price of each such device, subject to reciprocity and other standard terms and conditions. Qualcomm’s expectation is based upon its understanding of the current LTE and WiMax standards under development and its existing patent portfolio. Qualcomm’s current expectation may change in the future based on, among other things, changes to the LTE and/or WiMax standards and/or changes to Qualcomm’s patent portfolio (e.g., acquisition of additional applicable patents)".

[zombywolf]

Techinvestor, you are absolutely right about your QCOM analysis. Thanks for your well researched information. IMO, QCOM has as many
reasons to buy IDCC as AAPL, maybe more so. For years we were in a
parallel course to them in patent licensing of phone patents, without the chip business. If there is a company that understands us, its QCOM. Our engineers will fit into their operation well after
a purchase, the additional patents will make them the pre-eminent
licenser of phone patents as an almost singular source. My concern is that they dont have the cash reserves of the other interested bidders, and our chances of a greater than 6B sale wont be in the cards. At 6B, that would be a steal for them going forward and I
think IDCC would stay independent at that price. But they got
us once before on CDMA, maybe they are looking again for a deal.

[zombywolf]

Techinvestor, you are absolutely right about your QCOM analysis. Thanks for your well researched information. IMO, QCOM has as many
reasons to buy IDCC as AAPL, maybe more so. For years we were in a
parallel course to them in patent licensing of phone patents, without the chip business. If there is a company that understands us, its QCOM. Our engineers will fit into their operation well after
a purchase, the additional patents will make them the pre-eminent
licenser of phone patents as an almost singular source. My concern is that they dont have the cash reserves of the other interested bidders, and our chances of a greater than 6B sale wont be in the cards. At 6B, that would be a steal for them going forward and I
think IDCC would stay independent at that price. But they got
us once before on CDMA, maybe they are looking again for a deal.

[slacker711]

2. Increase QCOM FRAND licensing rate by controlling larger % of LTE patent pool

You are absolutely right that an acquisition of IDCC would allow Qualcomm to raise their LTE rates, but that is only true for currently unlicensed companies. Qualcomm has already licensed Nokia, Samsung, and LG as well as at least nine other companies (up from 9 total last November). They likely have half of the market already licensed so the incremental rate gain would only apply to the other half of the market.

Moreover, the LTE rate is applicable only to LTE only handsets. A LTE/CDMA handset licensee pays the royalty based on the CDMA rate. That means the additional gains to buying IDCC would only apple to LTE handsets. I now expect LTE only handsets to start rolling out in the US in 2012, but we are far far ahead of the rest of the world. Most of the world still hasnt figured out their LTE spectrum policy and they dont have the advantage of rolling it out in virgin 700MHz bands.

LTE only handsets are only going to be a small part of handset sales until the 2nd half of the decade.

Add all of that up and the incremental revenue gain from Qualcomm buying Interdigital is going to be tough to justify. There should be other entities that are able to derive FAR more value from Interdigital's patents than Qualcomm.

Slacker