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However, that is likely to be only 6% of the chipset cost and not the cost of the handsets using the chipset - a very different amount of $.
MO
rmarchma, for the purpose of improving earnings due to the new Pantech license, couldn't IDCC arrange to give the $30 Million investment money so that they would be able to pay IDCC their license fees? In other words they shouldn't just net the difference and not show increased earnings.
Nokia couldn't have found a better advocate than Benjamin Levi.
MO
I may not have expressed it properly but that was my point exactly. It would take an extremely higher volume of sales at a much lower royalty rate to generate this kind of prepayment and the period for prepayment might have to be for more than three years.
MO
No, I had 3 or more years in mind.
MO
I figure it at $12.5 Billion if royalty were 1%, yielding $125 Million before prepayment discount.
This could represent 1% of 25 Million Handsets sold at approximately $500 value, or a larger quantity at a lower, wholesale, value.
But 1% or $5 per phone seems to me a little ambitious. I welcome other calculations that might yield the $105 Million prepayment. This might require a much higher volume of handset sales than 25 Million.
MO
dclarke, I agree. I believe they gave this a lot of thought when they struck a 7-Year deal with Apple and included terms for new activity beyond the fixed rate period of 2-years.
Remember, there was not even any mention of 3G in that deal, only a reference to future models, if any.
MO
Mickey, then we may get to find out the source of this $105 Million.
MO
Jeffree,
Although the consensus on the board seems to be that the Apple deal was a "fixed price" deal that yielded only small direct contributions to IDCC's revenues, I am convinced that it was a "hybrid" deal yielding fixed income for a short term (e.g. for the 2G period of sales plus a component for future handset models that Apple might bring to market (i.e. 3G).
Based on the response that Bill Merritt gave to Tom Carpenter when he questioned him about the California company (see citation below), I think the license agreement included royalty bearing clauses for 3G and that the $105 million prepayment coincides with Apple's closing of a new deal in China. Prior to this, IDCC couldn't have included this portion of future Apple sales because it wasn't certain enough, so it is new money!
http://seekingalpha.com/article/152211-interdigital-inc-q2-2009-earnings-call-transcript?source=bnet
Tom Carpenter - Hilliard Lyons
If you do fixed price, you think there might be, maybe every two years reset, if you don’t have a case and what would that through company out California that’s done extremely well, has a fixed price dealing, and you are going to walk into that for seven years?
Bill Merritt
There are definitely provisions you can put into the (inaudible) and both side can put in, that provide some market adjustments and I think -- again it depends upon the term of the deal. The sorter the term, the less you concern because there is not much that can happen. They usually have pretty good visibility for a year or two beyond that. Longer term, you can have reset provisions, or you can create hybrid models.
That could be a hybrid model where it’s partially fixed, partially variable, so that and thus in that situation you are protected to some degree, if the volumes take off because you at least have eight running royalty component but that licensee, because that running royalty component would be smaller because of the fixed component they get a benefit if they sell more. So, looking at things going forward is I think it may not be running versus fixed versus some hybrid of that.
Which one of our existing licensees is the most "secretive" and just closed major deals in China?
I believe that the original Apple license agreement had additional clauses for per unit royalties for 3G if and when they penetrated China.
My guess is the $77 and $105 Million prepayments are from Apple for a specific period of future sales to take advantage of prepayment discounts.
The reason it was buried in the 8k is that IDCC felt they had to make this significant dollar amount public but, at the same time, respect Apple's desire to keep their business low-key.
(MY OPINION ONLY)
Ziploc, you may be onto something here.
It may be possible that IDCC's patents are valid, enforceable, that they are being used in Nokia's handsets, they intersect the claims constructions but, due to some technicality, do not infringe - hence no violation.
Possible technicalities:
- Implied license
- Re-interpretation of previous agreements
- Flow-through from joint TDD work
- Nokia's refused rate offers
Maybe somebody can think of other possibilities. Time will tell.
MO
Ghors - why don't you put in a BID of $50.00 for 1 share and collect on his offer?
MO
No, I think the shorts are trying to walk the price down below 30.00
MO
400 traded at 30.65
From Motley Fool Stock Advisor email update:
InterDigital
Ding! The bell has rung. Wireless innovator InterDigital's (Nasdaq: IDCC) long-standing bout with Nokia (NYSE: NOK) over patent infringements is under way. InterDigital is claiming Nokia violated many of its patents through the sale of certain 3G handsets and components in the U.S. As in last year's punching match with Samsung (which ultimately resulted in a favorable settlement for InterDigital), the U.S. International Trade Commission is refereeing the match. Also like the Samsung case, the commission staff, which renders nonbinding recommendations, has found in favor of Nokia. InterDigital hopes the more powerful administrative law judge's initial determination, due no later than Aug. 14, will counterpunch in their favor. Of course, Nokia could decide to settle, as Samsung did, prior to that initial ruling. Already licensing roughly 50% of the world's 3G handset market, a knockout against Nokia would virtually lockup the wireless industry for InterDigital.
That pop came with a well worded PR which helped the price action. I wouldn't expect another pop based on the same news.
Now, the price is rising slowly as we approach the earnings announcement, a perfect setup to give us a haircut again based on selective negative earnings reporting.
I would suggest that those with major holdings try to protect their paper profits by hedging with some cheap PUTS until after the earnings release no matter how optimistic you are about IDCC's future. If there is no pop or no haircut you can immediately re-sell your PUTS and recoup your insurance premiums. (I wish I had thought of that in the past).
MO
Whizzeresq, I have a free iHub A/C and can't send PM's. Therefore I wasn't watching for incoming PM's either and missed yours. I just read it. Please PM me your email address and I will give you an update on your subject of enquiry.
OT IFX is being voluntarily delisted from the NY Stock Exchange in a few days. Does anyone know what happens to your shares if you are holding IFX? How can we trade in IFX after delisting?
OT Mickey, I am so very happy for you and your wife-to-be.
Congratulations and may you love and appreciate one another for the rest of your life. I found my soul mate 9 years ago and we tell each other how much we love each other every day. God bless you both.
Just some random thoughts about the implication of Exhibit 10:18.
A number of years ago IDCC bought some patents from Tantivy. If there is a new deal between IDCC, Samsung and Tantiy, then this might involve passing through to Samsung some of the Tantivy technology.
Can anyone elaborate Tantivy's area of specialization? Was it in antenna technology? Are we talking about MIMO antenna technology to be used in the MIH environment?
I suspect Exhibit 10:18 covers a ten year plan/forecast of a new direction being taken by IDCC and the potential revenues involved.
all inmho.
The real future catalysts after Nokia will be the quarterly recurring revenues and resultant earnings.
This is why their keeping a lid on the price!
Ronnie, don't we derive Infineon revenue from some LG handsets besides Apple's?
This analysis sponsored by.........THE SHORTS!
MO
My perception was that you were trying to sow more fear as to the possibility of the company being bought out at these lower levels.
MO
IDoCare, the Apple revenue is predominantly fixed fees per quarter, not per-unit revenue (directly from Apple). This is supplemented on a quarter-lag basis with per-unit revenues from IFX for Apple sales. Perhaps someone can refine this analysis with real or hypothetical dollar numbers to show why Apple hasn't reached 10%.
MO
Not a very balanced review.
Notice that they don't mention the one time 9 mil charge.
I think they should have waited until they booked the 1st $25 million from Samsung before taking their bonuses.
The_Net - Thanks for the article on Europe. I hadn't realized how bad things were over there. It will surely have a major impact on us.
OT HONG KONG (MarketWatch) -- Australian private sector credit rose in January
Micky, the Australian's have used subsidies to first buyers to help kickstart the credit loans. This is similar to the approach you were recommending.
Copy and paste the following link:
http://www.marketwatch.com/news/story/Australian-credit-tweaks-back-life/story.aspx?guid={57E94C56-6199-4E0E-829B-537D57EA1875}#comments
Maybe someone can post some messages over there containing links to significant IDCC events as reported on IHUB (e.g. Samsung settlement announcements, recent licenses, etc.)
MO
Thanks. Missed that info.
I think the shorts will walk the price up again to give them something to sell into (optimistic investors) then bang down the price to shake out the stop losses that followed the price up. Then they will be able to cover some shares.
MO
What was the effective date of the Samsung Settlement? Was it when the Term Sheet was agreed to back in November 2008.? In that case wouldn't it be possible for them to assign one quarter's worth of the Samsung fixed fees ($25 million) to the 4th Quarter, 2008, even though the first payment was not received physically until sometime in January?
my3sons - you sure have a way with words! loved it.
I'm hoping for additional upside surprises! We all can hope can't we?
MO
Monday pre-market is my preference!
OT Thanks for your explanation Micky. I think that forcing an immediate Mark to Market of bank assets would close down too many banks that might otherwise survive and be a productive part of the new economy based on your stimulus plan of $25,000 per home owner. Start the stimulus first, let it begin to restore to value some of those shaky assets, and then force the application of the Mark to Market policy.
MO
OT
Micky, can you explain the Mark to Market issue to me. What does doing away with M to M accomplish?
Will it have the same effect as a good-bank/bad-bank split to try to leave behind a healthy bank?
Could they achieve the same end with the "temporary nationalization" idea of government taking over bank ownership, detoxifying it, and then re-privatizing it again as a healthy bank?
By the way, I loved your idea of putting $25,000 in home-owner's hands to shore up housing, and eventually, the economy. I think it is brilliant! Is there any way you can promote that concept to government?
OT The_Net, The 5th wave down started on January 6th. This last leg down is developing in 5 sub-waves of which the first 2 have already taken place and the 3rd nearly completing last Friday. It looks like the 3rd sub-wave has developed further today to land at 743. I would not be surprised that the bounce starts about here (sub-wave 4) up to about 800-814 over the next few days and then the final 5th sub-wave of the 5th wave down. (Unless the entire pattern fails by too high a rise on the 4th sub-wave).
I will email you a copy of the latest short term update.