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2G vs 3G
how can IDCC sign anyone without NOK being settled??
I agree with that statement for 2G. When the arbitration is finished and the NOK liability is determined, then IDCC will be able to go after the rest of them for 2G based on the royalties from ERICY and NOK. That will set a very strong indication of IDCC's 2G patent value, and litigation would not likely be a cost effective alternative for the infringers.
However, for 3G I have to disagree. We already have a 3G license with NOK - it just does not have a rate. 3G is not a part of the arbitration. IDCC needs to break the logjam on 3G. No one wants to sign because then they have to pay. Until IDCC can somehow position it so that signing a 3G license is financially favorable to waiting, no one will sign. I don't see how the 2G license has any affect on that. IDCC's management has also stated that 3G licensing is not affected by the arbitration. It's been said that IDCC will not license anyone for 3G until they have signed for 2G. If that is the case, I'm sure a company interested in signing 3G could be pursuaded to sign a 2G license that mirrors NOK - what ever is decided for NOK goes for them. Since that is going to be the eventual result anyway, it should not be a problem.
Arbitration = 2G = significant, but not long term, revenue.
3G = hockey stick, calculator with a lot of digits, watershed, Rookie 100, genius or idiot.
Thanks for the clarification
The 50 MA and 200 MA are the 50 WEEK moving average and 200 WEEK moving average
I did not understand that the timeline was weeks, not days. I thought it was just using a weekly price to compute the average over 50 and 200 DAYS. Now I get it.
Thanks.
It still does not make sense
Whether they took daily or weekly prices there is no way that either average could be below 15, nor could the 50 day average be 4 points higher than the 200 day average. The 50 day "average" line is above almost every close shown on the chart over the last 50 days, and the 200 day "average" is below almost every close shown on the chart for the last 200 days. I don't know charting but I do know how to average.
It's not important, so I won't argue it any further. I'm just pointing out what appears to me to be an error in case you want to look at your charts to make sure they are giving you accurate information.
Need help reading the chart
It doesn't seem accurate to me. The 200 dma is under 14.50 and the 50 dma is over 19. I haven't done any checking, but IDCC has been over 19 only briefly in the last 50 days and has been under 14.50 for less than two weeks. Due to the post earnings price decline, I would expect the 50 dma to be less than the 200 day. Please tell me what I'm missing.
Thanks.
Share price languishing
Idcc share price is languishing for the wrong reason IMO. Investors are looking at a potentially poor Q3 report. Q3, is not the significant event for this company. What is much more important is the arbitration decision being reported in Q1 2005. After the Q3 report, whether good or poor, is history, investors will focus on the potentially favorable arbitration decision and this should reinvigorate the stock.
You are right, the focus will soon be on the arbitration. However I disagree that is the key to this stock. Arbitration is for 2G, which is important, but it's not where the big money is. 3G is what is going to drive the stock price for the long term.
My experience with IDCC has been when the volume is low, the share price is trading in a tight range, there is no news on the horizon, no hot rumors and the board mood is down is the time when the price starts to climb. I can't explain why, nor is it a good reason to buy, but I am fully invested right now. It might still be "dead money" for a while, but when IDCC finally does get 3G licenses signed these prices are going to look damn cheap.
Maybe IDCC should offer the 18 months ending September 2004 at half price for any company that signs a 3G license by the end of September. For each month after that the discount period is reduced by one month, so someone signing in October would get a 50% discount for the 17 months ending August 2004. Give them a reason to sign sooner rather than later. The downside is that we would owe a credit to current licensees under MFL provisions, but if we can break the dam on 3G it will be worth it. And I wouldn't feel bad about giving the firms who were honorable enough to sign up already a break. I hope IDCC is trying creative ways to incent companies to sign now. Waiting for 2G was a big money saver for the infringers so we either need to entice them or sue them, otherwise why would anyone want to pay? It ain't about fair or right, it's about what they can get away with.
Hookrider, regarding your key point
Key point, why bitch at IDCC BOD & management and us on the IDCC board that will wait till it's well above "market value" before "we" sell? Why not bitch at the "street" or "market value" makers?
The "street" and the "market value" makers have no obligation or interest in making any particular stock, including IDCC, perform well. They vote with their dollars for their own best interest. IDCC management does have a responsibility to make IDCC succeed. While I know it makes some of you crazy to hear it, that responsibility is to the IDCC shareholders.
If IDCC had resolved 2G, were signing 3G licenses regularly and projected recurring earnings of over $2 per share for 2004 with significant licensing still in progress and we were valued here, then I would be screaming to get the word out to the market because they are missing obvious value. I couldn't blame management for the low stock price if they were executing their stated plan and making real, measurable progress towards getting the bulk of the market licensed at decent (.4% - 1%) rates. Until their execution improves, they will be criticized and second guessed.
I do agree with you that it is ineffective to complain on a message board, however sometimes it does help to vent one's frustrations. So those who are bothered by the "negative", "whining", "complaing" and "bitching" about IDCC should use the ignore button or accept the fact that those posts aren't going to stop as long as the share price is down. And those who are bothered by the "if you can't say anything nice about IDCC, then don't say anything at all" crowd should use the ignore button or accept the fact that those folks are going to growl and snipe at any unkind comments directed at IDCC.
Re: IDCC, Love it or leave it
if you hired someone to work on your house and they weren't performing up to your expectations, would you not fire them and hire somebody else or let them continue to do shoddy work until it was done?
We do not have the choice of firing the general contractor, we can only sell the house. If the work was not up to my standards, which resulted in the current market value of the home being depressed, but I felt the foundation was solid, the actual workers were excellent and the location was prime, then I would wait for home to be completed so I could sell it at its fair market value. Because I believe the intrinsic value of the home exceeds what the market is willing to pay today, it would be stupid to sell, in essence throwing the baby out with the bath water. So a rational person might choose not to sell and let it be known that he expects better leadership and performance. Especially in light of the generous amounts that have and are being paid and the incredible bonuses for even moderate success.
Jai,
I appreciate your contributions to the board. I read all of your posts, and while I disagree with some of your opinions, I do respect your knowledge and enjoy your input. However, this statement from your post is a pet peeve of mine, so I feel compelled to comment.
Bottomline, if the stock goes up, I'm very happy and have no complaints and will praise these guys (good job on the Carpenter report). If the stock goes down, I'll bitch and moan about management and what they are doing wrong. (only one license this quarter came from the economic discussions).
To bottom line it and decide stock up, everybody is doing great work, stock down, they're all bums, does not indicate reasoned analysis. That mindset is simplistic and leads to unfounded evaluations. There are many, many factors that affect stock price, so to use it as the sole criteria for judging management is terribly flawed. What really bothers me about this way of thinking is that it leads to poor decisions. Stock up, let's give these guys whatever they want in options, etc., if the stock is up I don't care how much we give away, I'm still ahead. Stock is down, throw them all out - don't look at the company's results and business plan, I want a higher price now, and tomorrow and every day after that.
What if you bought your stock at $10 in your regular account and bought at $25 for your IRA. Does that mean that IDCC's management is brilliant for your regular investment, but stupid for your IRA investment? Have you ever worked for a company that was struggling or failed - does that mean you were incompetent when you worked for them? Were you working for a company that was flying during the boom years? Were you doing much better work at that time then you had before or since? I do understand that stock price is the way we judge our investment, and it is an important part of evaluating management, but only in a long term sense. To run hot and cold week to week depending on the recent price move is not wise.
Judge management by how the company's business is doing. Are they growing revenues, are they controlling costs (YES, expenses do matter - top line is important, but bottom line is what gets the multiple by the street), are they getting 3G licensing done, is the company continuing to generate commercially relevant patents, are they maintaining a strong balance sheet. If they are accomplishing those and other business related goals then management is doing good work regardless of the recent share price action. If they are accomplishing those goals, then LONG TERM the stock will perform well. Long term success is managements job, not worrying about day to day or even month to month stock performance.
IDCC price action
Nasdaq, S&P, Dow, QCOM, NOK, ERICY, MOT all down, IDCC up over 2%. What does this mean? Not a whole lot. Nor does it mean a whole lot when IDCC under performs the market for a day, so those of you that like to post those "IDCC sucks - look at how it did today compared to xyz" please remember this.
Also, for the chart people out there, can any of you post a chart showing IDCC vs the indexes and companies listed above starting the day before the insider sales through today? I suspect that IDCC's relative performance will be similar, indicating that these insider sales caused only a minor blip. This is not to rehash the old arguments, just something to show that these sales are not worth getting upset about.
Alaska (regarding Teecee)
Thanks for bringing Teecee's posts from the Yahoo board last week. Teecee has a great deal of knowledge that can help us better understand trading in IDCC. If you or anyone else who follows the Yahoo board is willing to copy and paste the substantive portions of Teecee's posts to this board it would be a service.
Frank
DD, Great post, I agree completely.
Corp Buyer, different issue
I just addressed insiders selling their shares. I purposely avoided the issue of the appropriateness of the stock based compensation. That dead horse has been beaten into dust and causes big arguments on the board that serves no purpose at this point in time. So if you can let the issue drop it would be a service to JimLur's forum.
Thanks,
Frank
Insider sales
Good people, please refrain from this moaning and gnashing of teeth every time an insider sells his stock. Unless it turns out that the sale was based on inside info in violation of the letter or spirit of SEC rules, there is nothing improper about it.
The insiders have a fiduciary duty to do their job to the best of their ability for the company. They do not have a duty to buy or not sell shares to avoid hurting the share price. Once they get shares, they are entitled to sell them for whatever reason they choose, just like any other stock holder. One very good reason is to diversify. I've advised many a client that had their job, pension and portfolio all in one company to sell. It's the prudent thing to do.
Does this hurt the stock price? Probably a little bit, as many people see an insider sale and assume no good news on the horizon. However the affect is very short term, so unless you were going to sell in the next week or so, it won't affect your investment. And if you are planning on selling soon, why should you be able to and not Uncle Billy? It would be ridiculous to pay people with stock that they are not allowed to sell. If you see this as actual bad news, sell and buy back when your confidence returns. If you don’t then don’t worry about it.
Ivjack, allow me to retort
I generally try and look in on this board a couple of times a week. Historically, I have found this board to have a handful of insightful posters who know much more about this industry and life than I do. In short, I use it as a learning tool.
As an investor, I have precious little interest in the "tiffs" that I see play out in this forum. Moreover, I am amazed at the maturity (lack there of)displayed by most of the contributors. Today, was such an example.
If you have so little interest in the tiffs, why do you make your quarterly post to call for the reinstatement of the tiff master? One who insults and bullies those he disagrees with. The one who starts the pissing matches and always has to come back with a bigger insult if anyone dares reply?
Censorship is an anti-American concept. It is the response of small minded individuals unable to deal with alternative lines of thought. Political Correctness has no place on an investment bulletin board. My only concern is in gleaning information that can help me make an informed decision regarding my investment.
Censorship, in the un-American sense, is denying free speech because of the ideas presented. Suppressing speech that has no socially redeeming value and that leads to conflict or danger is part of the American legal system. Try yelling "Hi, Jack" to a friend in an airport and see how that goes over. Free speech is freedom to express ideas, not freedom to be obnoxious and belligerent. Teecee tries to shout down and belittle those who post what he thinks is wrong. He seldom debates the merits in a coherent manner – he gives terse, cryptic rebuttals wrapped in insults about the person’s character, motives or any other target he can find. Teecee wants censorship of thought, not JimLur.
Lurgio has shown repeadedly that his agenda of control must dominate at all cost. I for one am tired of this retired, holier than thou truck driver telling us whose posts we can read and whose posts are off limits. I promise you the bond trader is a helluva lot more insightful CB Jim.
JimLur’s agenda is to provide a forum for reasoned discussion of IDCC, including potential positives and negatives. His rules are very simple, stay on topic and be civil. He encouraged the banning of one poster, the infamous Once, whose contribution was to virtually scream IDCC sucks over and over to take the discussion away from IDCC and onto him. I appreciated Jim's effort and Matt for making an exception to ban Once.
Teecee makes some valuable contributions to this board, but many of his comments are written in teecee speak which makes his point difficult to understand. He also makes many, many off topic insulting posts that dilutes the content of the board and leads to the pissing matches. JimLur gets good information and checks sources and calls Janet for clarification, then reports the results. Maybe not brilliant insight, but strong and consistent due diligence. I appreciate it.
Good luck to all and may freedom once again find this board.
That’s not freedom, it’s anarchy. If you want freedom, go to the yahoo board. I haven’t read it in years because of the high volume of posts of people bashing or pumping with little content. I am very grateful to Jim for taking the time to create and monitor this board as well as making substantive posts to help me stay on top of my investment in IDCC.
JimLur, buy back vs. dividend
I love the buy back and hope they continue. It is anti dilutive and helps EPS by reducing the # of shares. Yes, it's only ~2%, but it helps. A one time dividend would reduce the share price by the dividend amount on the ex-dividend date.
I can think of no better investment for the company than to buy IDCC stock at these levels. I think IDCC's share price is going up significantly over the long term, which is why I hate dilution. Dilution is a tax on my investment. Buybacks reduce dilution, which is why I think this is great news.
Olddog967, You are right.
Count: I agree with what you say about the need to license 3G. However, if the arbitration board comes up with a one time settlement payment close to what IDCC says is due ($300 - $370 million), I don’t' think that will be ignored by the market.
The results of the Nokia arbitration will have a big impact on the share value. The resolution will not only be for back royalties, but will also set the rate for 2G going forward for Nokia. With that license in hand, IDCC should be able to go to other non-payers and lead to similar agreements. One might even say a positive resolution would be a watershed for IDCC. Those recurring 2G revenues will give IDCC a strong, predicable earnings base. Those earnings will make IDCC attractive to more conservative investors and give them the visibility they require.
The catch up amount will also have a significant affect on the share price because it will be so large. However the affect probably will not be much more than the total dollars received divided by the shares outstanding. It is important, but not nearly as important as the ongoing revenues.
If we can continue build on the recent 3G licensing success in a timely manner, then IDCC will have a great future tied to the success of their licensees instead of their lawyers.
Pumping the profits when they count
The market values recurring future earnings at nice multiples. "Catch up" or one time chunks of revenue are virtually ignored.
Right now IDCC is not valued on a multiple of current earnings, which is why beating or missing current earnings estimates produces only short term blips, as the most recent quarter's activity demonstrated.
The market is currently focused on what IDCC will be able to get for 3G. 2G is on the way out and those earnings will be diminishing. Once IDCC has a steady revenue stream of recurring 3G royalties, then IDCC's price will be based on ongoing results. At that point every penny of quarterly earnings should add a dollar or more to the share price (.01 x 4 quarters x 25 PE = 1.00). That is why we want to defer the revenue recognition to the extent appropriate under GAAP.
That is also one reason why it is so important for IDCC to license 3G VERY QUICKLY. If we have to wait and collect years of back royalties for 3G, the share price will languish and when the money finally does come in, the prior years' portions will have a comparatively tiny impact on the share price. In addition, when getting paid for old debts, it is somehow accepted to take a discount for collecting late. I don't get it, but I see that it is the reality. So barring a court verdict, we can anticipate settling for a discount on old amounts due if we do not get 3G licensed in the near future.
Proxy
At this late stage in the game, does anyone have any idea
where the proxy vote is headed in reference to Roath?
Yup, the institutions. My guess is that they will vote for Mr. Roath. If they have an issue with the RSU they can bring it to the attention of management directly. They don't need to use protest votes to get a company's attention.
JimLur, No they did not.
Management has guranteed us we will have the same amount of cash in the bank and the end of 2004 as we had at the end of 2003
Management projected IDCC would have a positive cash flow for the year. They did NOT guarantee it. This is the problem that IDCC and other companies run into with providing information. If they say nothing they get slammed for not giving guidance. If they give guidance, then some investors take this guidance, which is merely managements best informed guess at the future, and hold their feet to the fire if they are wrong. Expectations and projections somehow turn into guarantees. So management quickly learns to keep quite. If you want management guidance the investors have to allow them to be wrong sometimes. Unless one believes they are intentionally misleading investors, cut them some slack when things turn out a bit different.
Olddog, nice article
I especially liked this part about quick trials and being plaintiff friendly.
The court started churning out patent cases even faster after Ward, the town's resident federal judge, put together a set of rules specifically for patent disputes.
"There are three reasons plaintiffs lawyers like to file in Marshall," says Otis Carroll, of Tyler-based Ireland, Carroll & Kelley. "They are familiar and comfortable with the patent rules, Judge Ward does not tolerate jacking around with discovery - he's stern that everyone cough up what needs to be coughed up - and he holds everyone to a prompt trial date."
Carroll, who works as co-counsel with out-of-town firms, says the juries also give plaintiffs an edge. Marshall is "a populist area, an old railroad town with good Democratic voters," he says. "Juries aren't afraid to write down big numbers."
amrwonderful and teecee are right
Those who are upset about the lack of a second licensee have only themselves to blame. Read the transcript. He said he was optimistic about signing a couple of incremental licenses. One came through, another didn't. Some have turned his statement into a guarantee of two licenses and now are upset that he failed to meet their personal expectation. If you think this has somehow damaged IDCC's street cred, realize that outside of this board, nobody analyzes every word from IDCC like it was a statement from God (Alan Greenspan).
All the complainers want is for IDCC to only make projections they are 100% sure are going to happen. Of course, many of these same people get upset at the lack of information from IDCC. All this whining is only going to push IDCC back into its cone of silence. Personally, I'd rather hear their honest thoughts and expectations, understanding that they will almost certainly be wrong to some degree. However at least I have an idea of their feelings. And I can accept their being wrong. I don't want them making bad deals now just to quiet the restless rabble. If the market pushes the short term price lower because of it, well I'm a buyer, so I don't mind. I have a long term focus and expect management to also.
IDCC is going to move to its full valuation in stages. The first is going to be the arbitration decision, which will give visibility for 2G earnings, with the low being NOK and Samsung and potential for others to sign up as well. That should also make way for 3G licensing. The first 3G license that triggers NOK and Samsung's 3G agreement will be the watershed. At that point, IDCC should be able to license the bulk of the market. The rate will be the key to how high we go. With product sales in the billions it is important to get the best rate possible. We need to be patient.
For those that accuse Mr. Merritt of pumping up the stock, note that there have been no insider sales since the statement, so no reason to pump it.
For those that think he hurt the stock, the stock price is back near (excluding bubble) all time highs on no news. A nice high base to launch from when news does come. Try not to sweat the volatility. If you are faint of heart, IDCC is NOT for you. Accumulate on dips and enjoy the ride.
Had to vent. Back to lurking.
Guess I need to open my mind.
i know all about signed contracts...in this game you'd better add more value to your offerings everyday....the manufacturers want to see the "effort" on your part....what do you think would happen if qcom.[who by your score doesnt need to invent a single thing more}...fired all their engineers...do you think their revenues would remain flat?
As a straight ahead, "just the facts, ma'am", unsuperstitious, accounting type who doesn't believe in ESP, conspiracy theories or debating what “is” is, I think that QCOM’s revenues should rise or fall with their licensees’ revenues if they never issued another patent until the contracts expired, unless there is contract language specifically requiring QCOM to continue to invent.
However, what this ride with IDCC has taught me is that nothing in a contract means anything unless both sides agree and act on it, or the courts hand down the final (after all appeals) ruling in each jurisdiction. So, teecee, you are right - my thoughts are too simplistic. Just living in a sheltered world counting beans.
QCOM doesn't have to justify it's 5%
idc sure as heck knows who the indemnifier is....my feeling is that the industry will steer idc towards qcom...like i said yesterday...the industry would rather not have to deal w/ both idc and qcom...and qcom has a lot to do to justify their 5%
demands
It's got signed contracts. How would buying IDCC help QCOM when there licenses are for their whole bundle???
Indemnification is NOT a positive
excuse me there sir!....the indemnifier sure as hell is qcom...theyve never publicly denied they are the indemnifier....a half assed journalist said they denied it in a half assed column....ill agree agree indemnity is not a big deal...and i actually see it as a positive...because it doesnt question patents...it questions contracts....just think for a minute how easy it would be for a manufacturer to not have to deal w/ both qcom and idc as seperate entitities...and dont tell me qcom has everything it will ever need to justify their demands....just like idc shored up their 3g portfolio w/ tantivity...qcom w/ a 40+ byn mkt cap...could shore up their 3g portfolio
I do agree than Qualcomm still is a good guess for who is indemnifying. However, I don't understand how you can see it as a positive. I've got to believe this is a major obstacle that IDCC is trying to overcome in getting licensed. And how can you say it doesn't question patents? If the patents are valid, then the indemnifier is taking on other companies liability on what basis? Maybe it's too early for me out here on the left coast, but I can't make sense out of your post.
To me indemnification is a big question mark that needs to be resolved before we will get the 3G licenses that will take IDCC from being a speculative stock to a solid stock that trades based on solid, predictable earnings. Why would anyone sign a contract and pay if they can get someone else to indemnify them?
Have they selected the 3rd arbitrator?
Did I miss that or do we not know? Has there been any indication of the progress or just what was stated at the last conference call? Thanks.
Bulldozer, very nice post
Well thought out and well written. I enjoy reading posts from informed, educated folks. A refreshing change from those who start with the answer then find information that supports it and ignores or belittles everything else.
Thanks
Good post Desert Dweller - on target. eom
In response to post on the IDCC Board
Ge_Jim, No problem...Congrats to your Gophers...I was happy they beat the team with not only the ugliest uniforms in College Football but possibly the stupidest mascot name..."the Ducks"...of course I guess if your called the "Gophers" you are happy that there is a team called the "Ducks", LOL! At least the U of Minn has good looking uniforms.
Even worse than the "Ducks" is their rival, the Oregon State Beavers.
Teecee, got your teasers for this weekend
I think you said that in December picking NFL teasers was like shooting fish in a barrel. Have you got some to share?
JimLur, I like your idea
"If the sealed document is well enough captioned. NOK could pick out what they want from the title. "
Let's hope F@J label them properly like 1,2,3 etc. LOL
However, the titles is a way for Nokia and the judge to determine what documents are relevant without actually seeing them.
As far as allowing Nokia's attorney's to see them but not Nokia, that seems like they're putting a lot of faith in the integrity of the participants. The judge says to the attorney "You can look at these, but you can't tell your client that is paying you a lot of money what they say." Can't say I see that as a good compromise, more of a 'split the baby' approach.
Dishfan, Great work!
Please do send this with copies to all the appropriate people. You really lay it out well.
Thanks,
Frank
What the article didn't say
Howard Goldberg wants every cell phone to use InterDigital's chip technology.
More to the point, he wants IDCC to be paid for every phone that does use IDCC's technology.
But rather than earn cheers or envy for its research prowess, Goldberg's company has earned enmity for its hardball enforcement of intellectual property rights.
So has Qualcomm, but they won in court so they are getting paid even if they aren't loved. IDCC tried being the nice guy, go along to get along. They got lovely Christmas cards but no checks. Now they want the checks. They're not in business to earn cheers, they want to earn profits. I'd say the handset makers have earned enmity for there unwillingness to pay for the IP they are using.
It has generated free cash in only three years since 1988.
While an interesting bit of trivia, the more relevant point is that IDCC has a boat load of cash right now, miniscule debt, and a future cash flow that should be strong to phenomenal.
But Wall Street loves this outfit.
I wish.
Given that a mystery company--Qualcomm says it's not the one--will now protect companies from InterDigital's litigiousness, that eliminates much of the fear of shunning Goldberg.
This is one point I do agree is a concern. As long as someone is indemnifying other companies, why would they sign? I always felt QCOM was the only one that made sense, but a comment later in the article gave me another idea.
Ordinarily, because it's nonrecurring, money from legal settlements is recorded not as ongoing revenue but as "other income," says Charles Mulford, an accounting expert at the Georgia Institute of Technology.
These settlements are to get paid for normal operations, not some extraordinary, one time event. By booking revenues as other income just because we had to take legal action to get paid makes no sense. It is the character of the income that is important to investors, not the method of collection. Otherwise our normal operating income is never shown in any period as recurring earnings, which would be truly misleading.
The company says accounting rules allow for such treatment.
So does our auditor. So does GAAP. If she knows of someone who says otherwise, why doesn't she state that? No, instead she puts it in a way to lead others to think that only IDCC thinks and does this.
No cash actually came in until a $7.8 million payment in the second quarter, with another $7.8 million due by the end of the year.
Now she is insidiously portraying IDCC's use of accrual accounting (as properly required by GAAP) as being somehow underhanded.
In any case, InterDigital may see its $33 million in profit for the first nine months nearly vanish because its insurer, Federal Insurance, is demanding a big $28 million cut of the Ericsson-Sony settlement to reimburse it for attorneys' fees it covered. This fight is now headed for arbitration.
No, it won't. Even if IDCC were to completely lose, it will not happen until next year, so it won't affect 2003 income.
For now InterDigital has another fight on its hands. Four handset manufacturers--Nokia, Siemens, NTT Docomo and Ericsson--are sick of patent disputes and have jointly agreed to cap royalty rates on patents for a burgeoning technology known as wideband code-division multiple-access. The consortium has suggested the rate be set at around 5% of a handset's costs.
She should say "are sick of paying for IP and have decided to collude to minimize there costs at the expense of companies outside of their club."
"We want to keep it as low as possible, to prevent some companies from just making money with their patents, as does InterDigital or Qualcomm," says Siemens' spokesman Florian Kreutz.
What is this, bizarro world? A purchaser states that they want to limit what they pay for a necessary component because they don't like the business model of the supplier. This gets quoted in a national financial publication as though it makes sense?? And then people wonder why IDCC is so litigious! When faced with an attitude like that, what else can you do? You either sue or decide to be a charitable organization that does all this work for the betterment of mankind and just relies on the generosity of the manufacturers to keep the doors open.
I've just seen the light on the possible indemnifier. It might be the consortium. They know that if IDCC can license others it will help validate IDCC's IP if legal action is taken against them. So by indemnifying the little guys they put the lid on 3G licensing and put the pressure on IDCC. They all hold out and negotiate as one unit. Either cave in on the rate or none of us sign. If that's what's happening, then I hope IDCC goes to court next week to sue for 3G infringement. I want IDCC to be a tax collector. No one likes a tax collector but that's because the tax collector has to be paid. Companies are not going to pay IDCC unless they are compelled to do so. The time for playing nice is at an end. Who do you think brought IDCC and this slant to Forbes? Let's find a favorable jurisdiction and file NOW. If it is the consortium might we be looking at anti-trust issues as well.
An important point I missed
NOK replied that there were 3 reasons for wanting access: 1) the PSJs are needed for arbitration because it is not just “fill in the blanks”, there are issues about what a patent scope is including the “single base station” argument; 2) they might discover reasons that the court erred in vacating the PSJs and they want to find justification for the court to reverse the PSJs; and 3) there is a lot more in the sealed documents that might limit the scope of IDCC’s patents.
Somehow when I read that earlier it did not register with me. My belief was that the Phase II contract was done and once a trigger company signed the rate was set. I thought that by using selected companies the assumption was that they would reach a fair market rate based on all the information, including the relative strength of the various patents. However, Nokia is asserting that the contract includes reference to patent scope for setting the rate. If Nokia's representation is accurate, then we could be going back to square one, which would be depressing as hell. I hope that Nokia is not correct on this point, but I now understand what Shallow Mind was saying when he pointed out my earlier post may have been more hopeful than objective.
My continued thanks to JKJ, Chartex, Ghors, L2V, RMarchma and many others who share their knowledge and hard work with us.
Amrwonderful, I agree
3G$s...Mr. Merritt will get it done when IDCC is good and ready.
My one fear is that Mr. Merritt is overly concerned with getting licenses done in 2003. I'd rather wait a bit and get the best deal instead of feeling a mandate to act, which could lead to a poorer result. Maybe the folks who were close to agreeing to licenses heard the CC and they decided to try to squeeze IDCC a bit. If that is the case, I'm glad he's being patient.
Remember folks, he did not guarantee anything. He gave his (I believe) honest expectation. He may turn out to be wrong. That does not make him a liar. I'd rather have management be open and tell us what they expect, but if the investing public converts expectations into promises, they will learn to shut up. If they are going to get roasted for being wrong, off on timing or in any way too optimistic, they have no reason to speak and then we can go back to pure tea leaf reading.
If we go months with no new licenses then we do have an issue to address to management, but it has nothing to do with his comments in the CC - it has to do with their business model and their ability to license 3G.
Thanks Duke,
You make a good point - it did not occur to me that the contract would have an out if patents were found invalid.
It seems that if some or all of the patents were invalid then licenses would reflect that reality. By specifying industry leaders as the triggers they tried to make sure the trigger company would be facing a similar $ hit as they would.
Without the contract we can't know for sure, so I appreciate your cautionary note.
balivet, goblue
Blue, this is Bushog snowed in. I agree but how about initiating coverage with a sell rating? That is really pathetic IMO.
I've got to disagree. The reason to cover a stock is to provide guidance to your clients. Once you decide a company is worth investigating and you've done your due diligence, why wouldn't you initiate coverage with whatever rating you feel is appropriate? IF an analyst's opinions were important to me and I owned stock in a company that he researched and he correctly determined that the stock was over priced, yet did not initiate coverage because he couldn't put a buy recommendation on the stock, I wouldn't be happy. Investors need honest opinions, good or bad.
jai, re the kitchen sink defense
"They aren't arguing that they don't owe something."
I disagree. Nokia is playing the "Kitchen Sink" defence. That means throwing out every single argument they possibly can have and hoping one works. The ERIC/SONY not a trigger is still to be addressed. So if they lose the trigger argument they can go back to the reduced IPR argument.
I'm not a lawyer (so those who are correct me if I'm wrong), but they signed a contract agreeing to pay what the other guy pays. Once the trigger argument is settled, they can't start contesting the validity of the IPR. They've already agreed to pay for it and the amount was to be determined by what others paid, NOT by how much IPR was proved enforceable. What they can do is argue that the rate was manipulated to hurt them and the true rate that ERICY is paying is lower because of the allocation of the royalty rate.
I think that Nokia may very well be right about the structure of the rate, but that does not mean there was collusion by IDCC and ERICY to harm them. ERICY was looking at their total cost and they didn't much care which way the bill was drawn up. IDCC did care, so they took the best they could get from ERICY and allocated it to their best benefit. I see nothing underhanded or unethical about that at all. If Nokia did not have the business sense to anticipate that happening, then that's their tough luck. Don't know if that's how the legal system looks at it, but it makes sense to me.
To paraphrase Dan Akroyd . . .
"Ricardo, you ignorant slut."
Just who died and made you King? You come onto this board, post a poorly stated question, then start ridiculing those that reply and mocking the board for not giving you all the information you want within minutes of your posts.
All you want is for us to identify IDCC's patents, break them down into essential and commercial desirable columns for 2G and 3G respectively, discuss in engineering terms exactly what each patent does and compare and contrast that with other IP out there and determine how difficult or expensive it would be to work around it, provide legal opinions on the enforceability of each patent to each manufacturer, and give you the licensing rate IDCC will get for 3G based on the engineering, legal opinion and status of the negotiations between IDCC and the companies in the industry. And you expect that information from a chat board. You may want to reconsider you DD approach.
These issues are all subjective and being worked on and negotiated by both sides. There has been excellent and thorough discussion of all these issues and more by informed and intelligent posters with knowledge and experience in engineering, the law, business and other relevant fields. Just because we don't all scramble to give you all the answers doesn't mean we are ignorant. My view is that you have not taken the time to get the basic information about IDCC, so to answer your question would require teaching you all the background. It's like someone asking to be taught how to play a song on the piano but does not know how to read music.
You'll find that if you narrow the scope of your questions, demonstrate knowledge of the area by stating your premises and ideas, and lose the condescending attitude, then this board can be a great resource. If not, you'll get more replies like this.
Re: Briefing.com blurb
InterDigital Communications (IDCC): here is a stock that produced a great earnings report, with stronger revenue and earnings, which is helping the stock today, but most of the long term investors are still way, way, below their entry point.
I don't think so. Except for the bubble and the past six months, IDCC is at all time highs. Buyers during the last six months couldn't be considered long term, and I've got to believe that people that bought during the spike up have either sold or averaged down if they believed in IDCC enough not to sell.
The problem is that the stock is still driven by concept investors who believe that the company's intellectual property rights on basic wireless technologies, primarily useful in 3G wireless technologies, will eventually reap huge rewards in royalties. Ironically, this type of faith tends to drive the stock far beyond a rational valuation.
Only if you define rational valuation only by multiples of reported earnings and ignore new revenue sources, no matter how large or how probable. I think rational valuation includes looking at potential and weighing in the expected range and probability of that potential. I thought that was called investment research and an integral part of rational valuation. I guess I'm just an ignorant “concept” investor.
When the company's fortunes turned around earlier this year, and the revenue trend started upward, investors drove the stock to the $28 range, or a $2B market cap, based on expectations that the huge royalty future was coming. When the Q2 revenues were only slightly ahead of the year-prior, the stock lost 50% of its value, to about today's level.
The stock fell because Nokia did not accept their contractual obligation and unexpectedly entered into arbitration, not because of the Q2 results. The stock is closer to 75% of it's recent peak, and anyone who bought at 50% got the low.
The stock is still driven by concept investors, yet most of the promise in the royalty stream is based on in-progress arbitration and lawsuits with Nokia and Samsung.
Yes, plus 3G licensing, which is also in-progress. Again, the “concept” is doing research and projecting the future, based not only on the ongoing but also the expected.
The lesson here? You need to know what is driving the price of your stock. It might appear that today's solid report is driving the stock, but the truth is the entire valuation of IDCC will likely hinge on the outcome of the discussions with Nokia and Samsung. A fundamental analysis is almost irrelevant right now.
Actually, this is largely correct. Current operations give IDCC a great base - recurring revenues exceed operating expenses, cash flow is excellent, however, if no other licenses materialize then IDCC is not a $20 stock. Fundamental analysis that consists of projections that include only current licensees will show IDCC is overvalued. But (and this ‘but’ is almost as big as mine!) there will be a rate set for 2G for Nokia, Samsung, and then the many others waiting on the sideline. IDCC will get 3G licenses which will bring revenue that will rise and continue with the 3G market. Right now, the market is pricing in very little for these. If you believe IDCC will get 2G revenues from the great unsigned masses and that they will sign 3G licenses with the bulk of the market, then it is hard to imagine IDCC having less than $2.00 a share in recurring revenue and a growth rate tied to 3G growth. Plug in those numbers to fundamental analysis and the share price should be at least 2x the current level.
All of these issues have to do with risk. Risk is unavoidable, but the real threat is ignoring the risk inherent in any investment. It is generally a good principle to spend more time thinking about the risk inherent in your investments than you do the reward. That's the lesson of all three of these stocks reporting this morning. - Robert V. Green, Briefing.com
Yup, this is a volatile, risky stock. Not for the faint hearted. But with risk comes reward, and IMO the risk/reward ratio is highly skewed to reward for IDCC. I don't think the share price will make a real move to the next level until there is some resolution on 2G and 3G, and it may not come until next summer. The "concept" to remember is to focus on the long term and unless you find something that makes you doubt IDCC's ability to collect on 2G and 3G, don't sweat the dips that are inevitable with this or any volatile stock, nor worry about commentary by folks who don’t know nearly as much about IDCC as you do.
Great job Ronnie,
and more importantly, good quarter IDCC.