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Yes, they are recognizing the stock value
They are recognizing the total value received of $112MM over the life of the contract. The stock will be on the books as an investment. The accounting is the same whether they received the stock as part of the deal, or had received all cash, then in a separate transaction, invested $22MM in Pantech. It wouldn't work in my head if the accounting were different for two transactions that had the same end result.
Whizzer, what are your thoughts going forward?
First, thank you very much for sharing your thoughts with all of us here is cyberspace. Very valuable, informed input from an intelligent, articulate, experience attorney. I appreciate all you provide here. Second, I understand that none of us have the full information due to confidential items, so any opinions, including yours, are based incomplete information. So I realize that any opinion is hampered by the missing info, but it would still be helpful to me.
What do you think is the best approach going forward? From what I've read, it seems that appealing the ITC decision would take a year or so, and then IF IDCC gets a favorable decision they would have to retry various issues at the ITC. Given Nokia's success in persuading the ALJ, and the additional time it would take to retry the remanded case, would this be a good choice at this point. Also there are apparently some limits on what can be raised due to what was ruled on, remanded, or not raised previously.
I liked the decision to go to the ITC originally due to the speed (whoops, look out for Batts), but that is no longer the case. I'm thinking that it may be best for IDCC to go to Delaware (and maybe other jurisdictions simultaneously) with newer, stronger patents that overcome Nokia's defenses at the ITC. IDCC would be free to present the case from scratch. While the process would likely be more than a year longer, I think the possibility for success would be much better.
Please point out the errors in my assumptions or logic so I can better understand. Whatever IDCC chooses, I hope they make a decision quickly. IMO, Nokia is not going to be receptive to any reasonable offers until we are back on verge of a decision. Delay pays for them.
IDCC bleeding cash? Are you high?
You are out of your mind. They have more than enough cash and foreseeable cash flow to pay a dividend, expand the buyback or use for M&A if they see a good opportunity. They have legally binding contracts with Samsung and others that will keep the operating cash flow very positive through 2010. After that, even without signing anything new, the potential negative cash flow would take many years to become an issue. Here's a piece of advice for you and all the emotional posters.
It is better to remain silent and appear an idiot than to post and remove all doubt.
Timing of ITC decision to review
Does anyone know when the ITC releases its decisions on whether or not to review - is it during market hours or not? I'm trying to figure out if it would be prudent for us to be watching the board extra close over the next few days.
Pantech looks like some good news
$15 million a year, $10 million after taxes should equate to ~$0.25 a share of incremental earnings. With a ultra conservative PE of 10, it should add over 10% to the share price from these low levels. Very nice.
It looks like Pantech has some financial difficulties and that gave IDCC an opportunity to craft a license that will be a win/win. Pantech gets some short term cash flow and IDCC gets a long term contract and upside potential if Pantech turns things around, both in revenues and in the investment. Go Pantech.
My one concern is if the Chairman at Pantech is Nigerian royalty. I've seen those deals where you send them money first and then you get your millions from them later - I'm not sure that they are all legitimate. (Yes, this last paragraph is a JOKE, so no need to click the reply button.)
Warren Buffett and stock buy backs
How does a stock buyback help insiders and not the common shareholders? I don't understand how that could happen, unless the buyback was done in coordination with insider selling, providing demand for their shares.
I googled "warren buffett buy backs" and the first two relevent hits quote Buffett saying that buy backs of undervalued stocks is an option to be considered when the company has surplus cash and the shares are selling below their intrinsic value. I strongly believe both those criteria are met with IDCC, so I hope that IDCC is aggressively executing the buy back at these levels. Mr. Buffett is against buybacks to support the share price, which also makes perfect sense to me. Here are the links to the articles I read. He is quoted as saying "I'm not opposed to buying back stock." at the end of the second article below.
http://www.buffettsecrets.com/share-buy-backs.htm
http://greenbackd.com/2009/01/26/warren-buffett-on-buy-backs/
Cash per share is $9 - $10
I don't think you should back out the $85 million left on the share buy back. If it is being spent it will decrease the share count. If the buyback were complete then the cash would be $357 million divided by ~39 million shares, or $9.15 per share. It will take some time to complete it, although I hope the IDCC is aggressively buying at these levels. I think they are allowed to do larger direct repurchases from institutional holders. There is likely some reduction in the cash for normal operating expenses. While IDCC is running at a profit, much of the revenue is from prepayments, so the net cash flow for the quarter excluding the payments that we've included in the calculation of the $457 million is likely to be in the neighborhood of a dollar a share, although I'm sure you can come up with a much better than my ballpark guess, Ronny.
I think they paid at different times
The $77 million was paid in two parts in June and July, while the $105 million was just received. I'm not sure why you are thinking they were paid at the same time.
My bias/opinion on Judge Luckern's competence
is in first and foremost in the legal arena. In addition, his training in the patent office and his long history of dealing with technical cases makes him better qualified than most in that are as well. This is my opinion as a layman with no legal training, and is based on his education, experience and his handling of the case as reported by our generous members who attended and reported back and on my reading of the bulk of the transcripts from the cases. This does not mean that he is infallible nor that the decision will not be overturned. However IMO we are not dealing with anything close to a Judge Batts, who exhibited two major problems in the case before her, which were ignorance and apathy. She didn't know what to do and didn't care, and therefore punted. If Luckern is overturned, I feel it will be due to a difference in opinion on a close call on infringement. We will not see it overturned due to his not giving it the proper time and attention or glaring error, ala Batts.
ITC decision in a new federal case
Since my biases are that Nokia's products do infringe and that Judge Luckern is a competent judge, my opinion is that IDCC lost the infringement decision due to not properly making the case in court, possibly due to having an expert witness who was not able to explain the programming language.
If my opinion above is right, then IDCC could refute the ITC decision on infringement by explaining to the jury that the limited time for presenting the case at the ITC resulted in them not adaquately document the infringement in the ITC, but in this forum we will have expert testimony showing in detail where and how the Nokia products do infringe on the valid patents.
ITC decision in federal court
Since my biases are that Nokia's products do infringe and that Judge Luckern is a competent judge, my opinion is that IDCC lost the infringement decision due to not properly making the case in court, possibly due to having an expert witness who was not able to explain the programming language.
If my opinion above is right, then IDCC could refute the ITC decision on infringement by explaining to the jury that the limited time for presenting the case resulted in them not adaquately document the infringement in the ITC, but in this forum we will have expert testimony showing in detail where and how the Nokia products do infringe on the valid patents.
Whizzer or other attornies,
Would it make sense for IDCC to file a new court action in DE or TX against ERICY or some other unsigned company now. The advantage would be to get something moving other than Nokia and to attempt to get the same or other patents confirmed in a court decision that will be able to be used as precedent (for patent validity) in other actions in the court system. This would allow IDCC to concentrate on infringement in their actions against Nokia. The risk is losing patent(s) in the court system, which would weaken IDCC's bargaining position. I just hate the waiting game because that works to the infringers' benefit. I hope that IDCC can come up with some plan to put pressure on the infringers to sign. They took a shot with the ITC and still have some hope and need to follow through. Finding other ways to move the licensing process forward while the ITC and federal circuit progresses. I hope there are some good options.
Tom Carpenter's knowledge of IDCC
Robjer, you posted
So what has tom Carpenter said or written since the ALJ?
He didn't seem any more knowledgeable on the conference call than the posters on this board who share their hopes and concerns everyday.
Anyone who can come close to matching the knowledge of the dozens of people who follow this stock daily and hundreds the follow it regularly is pretty damn impressive. We have attorneys, technical folks, industry insiders, investment professionals, accountants, chartists and many others with broad experience, intelligence and common sense. I don't think it is possible for anyone to have more knowledge then this board under the full disclosure rules. He asked important questions on the conference call. I am very anxious to see what his expectations are subsequent to the ITC ID. He analysis is very good and his predictions have been much closer than most on this board.
I appreciate Jim's ability to bring such good information from a professional to this board. If you or anyone else doesn't like it just ignore them.
Slacker, I appreciate your realistic posts
So many here act like IDCC is their child, and needs positive reinforcement to succeed. This board is not going to help or hurt IDCC. It can help investors better understand IDCC, which includes both potential successes and pitfalls. By understanding the risks and rewards we can make informed investment decisions.
They also seem to think that posts control the stock price. Only to a very small extent and only for the very short term. I'm amazed at how many long term holders are so worried about posts that might hurt the short term price.
I appreciate your posts and I thank you for sharing your thoughts. There are a few folks out here that appreciate realistic opinions even if they are not what we hope will happen.
Frank
I absolutely agree with that Revlis
The judge and the commission can disagree.
They have, they will and I'm hoping they do in this case. I just felt that those comparing Judge Luckern to Batts were way off the mark.
Gatticaa, good post on the ALJ
IMO Judge Luckern is not one who would punt. Nor is he, as some have suggested, too old, trying to split the baby or in any way incompetent or biased. While I am shocked that none of the 16 claims was found to be infringed on, I am not qualified to make that determination. My hope is that his ruling was due to IDCC not adequately presenting the evidence or that it is a close call and he leaned towards Nokia, but that the full commission or some other court finds that Nokia does infringe. However the fact that I don't like the decision does not make Judge Luckern incompetent IMO. I read the transcripts and saw a Judge that was sharp, engaged and in control. Doesn't mean he was right, but I do feel IDCC got a fair hearing.
I also disagree with those who fault IDCCs management for going to a decision because they lost. Hindsight is wonderful - look at Nokia's obviousness defense - but it is not fair to judge based on current facts not apparent at the time. In addition, we don't know what Nokia's offer was. If they were offering less than $60 million a year, I would've been very disappointed if IDCC had agreed. They stood up to the bully and got a black eye (no infringement). But they also got in a couple of good shots in the fight (patents valid) and showed for the first time that they are not afraid to stand up and defend themselves. So while the decision is clearly a loss and a painful set back, it is not a devastating defeat. Judge Luckern's finding of validity adds strength to the patents and IDCC going to a decision should make future bullies more reasonable in their demands as they know now IDCC is not going to cave in when push comes to shove.
I am encouraged by the price action today. A weeks worth of volume in the first hour and we're close to where we were 5-6 weeks ago. I was afraid of panic and I was ready to buy on margin if we hit the teens, but I'm very glad to see no signs of panic in the share price so far. I do hope that IDCC aggressively buys back their shares at this time. They have more than enough money to handle what ever strategy they want to pursue and still get the float under 40 million. Retiring 10% of the shares will increase earnings 11%. A good way to grow earnings while Nokia is playing out.
Yes, the decision was bad news, but I don't fault Judge Luckern's work nor do I feel IDCC was wrong to choose to stand up and fight. I look forward to the conference call.
Thanks Whizzer,
I appreciate your very intelligent and spin free posts sharing your expertise.
Frank
No violation due to no infringement
The rulings for all four patents are that they are not infringed and not invalid. So it seems that he's saying that IDCC has valid patents, but that Nokia's phones don't infringe on them. Wow. That is shocking to me.
Revlis,
Did you compile a list at some point of all the ITC filings? If so, please point me towards it. I'd like to compare the 466 you had to the 467 that are there now to see if some old document got posted at this crucial time, or maybe the most recent is out of order... a long shot, but what else is there to do.
Puts vs. stop loss order
Puts give you the right, but not the obligation, to sell the shares at the 25 strike price any time before the expiration date. Your effective selling price is 25 minus the cost of the puts. If the stock is higher on the expiration date, then you are out the cost of the puts.
The stop loss at 25 commits you to selling if the price hits 25. You are NOT guaranteed 25 because if the stock is halted or there are not enough shares bid at 25, then your stop loss is executed at market. The risk is that the market maker sees all those juicy stop loss orders, runs the price down briefly to take them out and then you are out. I'm sure there were a bunch of stops between 29 and the 27.86 low of the day that were executed during the morning. People who had 28 puts are out their premiums and still have the downside protection and upside potential. Stop loss investors have sold their stock in a taxable transaction, and now must rebuy at higher prices to participate on the upside and would not have downside protection on the new shares unless the bought puts or place another stop loss order.
So those are the trade offs between puts and stop loss as I understand them.
Some high stakes poker being played
and it appears that no one is folding before the river this time.
The way I see it, Nokia has a pair of black dueces, (the staff) IDCC has the Q, J of diamonds (issued patents) and the board is showing the K and 10 of diamonds and the K and 8 of hearts (the evidence presented). The river (Judge Luckern's decision) is about to be dealt. IDCC will win with any A, Q, J, 10, 9, 8 or any diamond (valid and infringed for any patent claim), while Nokia will win only if IDCC fails to hit any of their multiple chances.
Here's hoping the good judge flips over the Ace of diamonds, and IDCC not only wins the pot, but a nice bonus jackot for hitting the royal flush (multiple claims valid and infringed).
Be careful what you wish for
because you might just get it. Looks like my wish for IDCC to put the matter in Judge Luckern's capable hands may be granted.
I was very sure that we were going to see a settlement announced today through a filing at the ITC. So sure that I have not been at all nervous about my investment. For the first time I actually believe that there is a real chance that IDCC is going to let Judge Luckern decide. So tonight I will be one of the ones struggling to sleep. If there is no settlement, then I say thank you to IDCC management for having the confidence in their patents and the balls to get a decision. Regardless of the outcome, I will support management in that decision. Here's my musical salute to IDCC management.
Thank you Tom Carpenter
Tom has followed IDCC for a long time. He has a solid understanding of the company and the industry. His analysis is well thought out.
I appreciate his sharing his report with us.
What is an appropriate settlement to me?
Given LG's $57 million a year, Samsung's $100 million a year (that included forgiving 2G and prior 3G) and Nokia's much larger market share, I would say $400 million for a four year contract would be acceptable. This would include forgiving past infringement, which I hate but seems to be SOP in these cases. I would structure the contract as being for $80 million for year 1, $90 million for year 2, $105 million for year 3 and $125 million for year 4, based on the expected increase of sales of covered products over the next four years. This would show increasing sales and set the bar at an annual rate of $125 million for the next contract negotiation.
As far as the "line in the sand", I'd be comfortable with IDCC drawing that at anywhere between $80 million to $100 million a year, and going to a decision if Nokia refuses. My feeling is that IDCC’s history over the last decade has shown them to be unwilling to risk an adverse decision and I believe that other companies are not afraid to hold a hard line in negotiations. Until one stands up for what’s right, they will always be at a disadvantage. I spelled out the reasons for my preference to go to let the ITC decide in this post from about six months ago.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=36619695
If they get a win at the ITC, then add 10%-20% and NO forgiveness of anything, including no prepayment discount for the past three years of unpaid royalties. If they go to the full commission, add another 10% and if they wait for Obama, another 10%.
This is purely my opinion and there are many unknowns we are not privy to. Management and the lawyers have a far better read on the strength of the case than I do. I also am more risk tolerant than most, so I’m willing to take a chance when I think the expected value of the result is higher than the alternative. Hence my “all in” on IDCC. Many others are more prudent and careful and avoid risk. So while I understand this isn’t the choice that many would have, it is my preference.
I am expecting Revlis to post a link to a joint motion to stay the ITC decision sometime Thursday, and a settlement below my line in the sand to be announced by Friday. The good news is that it should boost the share price from what I think is a very undervalued level.
Is $300 million an appropriate settlement?
IMO, hell no. However to get an appropriate settlement one has to have the courage to stand up and demand it. IDCC has shown that it will forgive past infringement and take payments far below their $1-$2 per unit projections from the presentations rather than risk an adverse decision. There will be a press release heralding the great contract and most here will be very happy. Management will get big, beautiful bonuses for signing a contract at a lower rate that rewards the stalling tactics by ignoring past infringement. Since IDCC is so greatly undervalued, even a 5 year contract at $300 - $350 million should help boost the share price from these low levels, so IDCC investors will make money. But if you're thinking IDCC is going to get Nokia to cave in and pay much more than that I think you are overly optimistic.
The good news is that we should know in a couple of days.
The insider sales not worrisome to me
Note that all the sales were at $30.00 exactly. This makes me think that they put in Rule 10b5-1 sales specifying selling shares when the price hit $30. There is no way that they could've specified a date and had all the sales be at the same price. I remember someone posting that there was something like 50,000 shares on the ask at 30. Over 40,000 of them were likely from these two Rule 10b5-1 preplaneed sales.
Romuluss and Ream us
My suspicion is that Romuluss is one who thinks his postings can move the share price and is happy to try to take advantage of that imagined power. Whenever I see a poster who posts 100% positive at times and 100% negative at others sends big red warning flags up. Many here and especially over at AB love to look for posters with agendas, but ironically they never seem to worry about pumpers. Guess what - someone telling you what you want to hear is much more likely to influence you to your detriment than someone attacking your hopes and beliefs. Any conman knows that.
As always, look at the substance of what is said. If it makes sense and is supported, include it in your thinking. If it is based on things that are not supported by facts or relevant education/experience of the poster, then ignore it, whether you like it or not. Just because you happen to pick up a broken watch at one of the two times it is coincidentally correct during the day does not make it trustworthy.
Buying options as insurance
Options are expensive insurance IMO. The bid/ask spread often runs 10%-20% of the option price. The volume on options is low, so getting in or out of a significant position can make that spread even larger.
The other problem with options is timing. You not only need to be right about the stock movement, but also the time frame it occurs. Yes, the ID is due 8/14 and one would think that there will be news that will move the price by that date. However this is IDCC. Remember the November ID with Samsung? There was a settlement, but no terms were announced for 45 days. And when the news was announced, the share price was pretty stable. Which means that those that bought calls or puts in anticipation of wild price swings lost unless they happened to by some calls before the pre-decision run up.
I asked myself these questions as I thought about what action to take going into the ID date.
What are the chances of a negative result? IMO, <5%. IDCC's history is settle on the eve of a decision, so I put settlement at 90%-95%. If it does go to a decision, I've got to believe IDCC has at least a 50/50 chance.
If there is a negative result, how will I be affected by a potentially severe price drop? Since I have no margin and I'm not planning on using any significant amount of my investment money in the near term, any price decline will not result in my having to sell when the price is down. Since I also believe that IDCC's price is below where it should be, based on the fundamentals even without Nok, Sony-Ericy and Mot, my feeling is that any price weakness would be temporary and the price will recover well before I had a need to sell. If IDCC were to lose at the ITC, lose in the Delaware infringement action and fail to sign or resign any new licenses, then IDCC's price would not recover. I'm willing to take that risk because I feel that is a remote possibility.
If I felt I was over exposed and needed to limit my potential losses, I would sell some of my stock. If good news comes, buy back. Yes, you will lose some shares but IMO that insurance is far cheaper than the option route. Recent history has been that IDCC does not run quickly on good news. The risk of this strategy is reducing your upside.
For Bill Daglish and others considering cashing in options to lock in gains vs. holding for the big kill. My opinion is that lost potential profits from being conservative are less painful than actual losses from being aggressive. Given that you hold a great deal of stock, taking the options off the table makes sense. If the stock price is flat or down, you took your profits before they disappeared. If the price goes up, you still took profits and your portfolio has gone up nicely. The ironic part of selling the options before expiration is that even though you own the stock, a part of you is going to be rooting for the stock not to explode before the expiration date because of the woulda, coulda, shoulda thoughts that f with your mind because you want to make the perfect trade. If you have those feelings, then you shouldn't trade options because your almost always going to be unhappy with your trade.
The above is based on my 30 years of watching and investing in the markets and my 10 years following IDCC. Call writers and put writers have done very well with IDCC over that time. With a stock as volatile as IDCC, there will always be some spectacular hits that a speculator (call or put buyer) can point to, but on the whole playing options on this stock is a losing proposition. I've tried to make a killing with options a few times over the last decade. Lost more than I made. My best trades have been the ones I didn't make, such as not buying Jan 09 leaps in March 08 when I KNEW the ITC would rule on Nokia and Samsung or there would be a settlement with both by November 08, and that would easily send the shares over 40. Instead I bought 500 shares and held them.
Not worried at all
My feeling has always been if you build it, they will come. I do believe we are near the tipping point as far as checking all the boxes necessary for IDCC to be put on many radar screens, including the major brokerage firms. That will lead to full valuation. I've long said that my exit point is when IDCC is covered and rated a buy by two big firms. I have my fingers crossed that Nokia is the watershed event we've been waiting for, and that we'll need a calculator with a lot of zeros to calculate the profits and that IDCCs stock price chart will resemble a hockey stick. Experience has taught me to realisticly expect things to be a day late and a buck short with IDCC, but I still hope for a good surprise when we come to decision time. I think IDCC is undervalued even with a disappointing result.
New report is good and bad
It is bad because no one has actually looked at the company and understands it. They have IDCC classified as a "communications equipment" company. The text seems to be canned generalities that likely is similar for all companies in the sector. Peer group companies includes 3com, but not Qualcomm. The methodology is to take the financial results from the last year, plug them in to their formulas, compare the results to all companies they "analyze", and make ratings based on the relative score. Somehow they rate IDCC as being less volatile than 80% of the companies followed and show a beta of .47. IMO this report is very poor.
The good news is that over the next few quarters IDCC is going to be putting up very good numbers compared to a year ago and a quarter ago. There are many blind box investment tools and filters out there that have a similar methodology to this one. IDCC will have excellent growth numbers for revenues and income, declining expenses, a pristine balance sheet that includes a mountain of cash and insignificant debt, possibly a dividend and IMO an impressive recent price performance that should generate a lot of positive results from these types of programs. While I doubt many folks buy based on these things, I'm sure many investors do use them to locate new stocks to investigate. Once they do take a closer look many will discover the gem that so many here have been following for a decade and more. This should help IDCC's share price achieve a valuation in line with its fundamentals, which I believe will be at least two times the current price. I am assuming a positive result from Nokia, leading to contracts from Ericy and Mot.
Nice work by Ronny and dclarke
Ronny had his usual excellent projection, and with no big surprises, he was very close to the actual. Dclarke also made an excellent projection, well thought out and again, with the absence of any surprises, he also was within a penny and a nickel closer than the pros. Nice work gentlemen.
Nice work IDCC on a strong quarter. I am a bit disappointed that IDCC didn't aggressively buy back shares when the share price was irrationally (IMO) low. With the second Sammy installment, IDCC now has ~ $7 a share in cash. I can't understand why the shareprice is still so low. I still believe that value and price converge over time, so as long IDCC continues to execute the share price will have to climb significantly. Either I'm crazy and/or know nothing about stock valuation or IDCC is going to rise dramatically over the next few quarters.
Brass nuggets vs. paper mache
Loop, you stated
If Nok concedes that IDCC has been asking reasonable rates in license negotiation and the claims as constructed by IDCC can be found in its products, then they have to rely on a sweep of their invalidity claims on 4 patents. It will take some brass nuggets to make that decision not to settle and roll the dice. Nok has plenty at stake here.
Nokia has plenty at stake and so does IDCC. However IDCC has shown that they will settle rather than go to a decision. It takes brass balls to stand up for what you believe in, to take your best shot and let chips fall where they may. If IDCC can't get at least 80 million a year in a settlement then I hope they let Judge Luckern render his decision. But I'm sure it's not going to happen. I'm afraid that the sad fact is that the settlement is going to be tilted not towards justice, but towards the company with the biggest balls. Here's hoping IDCC grows a pair.
Thanks to Ghors and Loop for your legal analysis.
Thanks Revlis for posting transcripts.
You provide wonderful service to this board by quickly bringing important legal information here for review and analysis. I appreciate it.
Frank
OT - No hitter
Yup, I did catch the 9th inning of the no hitter Friday night. First home no hitter since big Ed Hailicki (sp) threw one at the Mets in the second game of a DH back in the 70s. I still have the ticket stub from that day.
And yes, John "The Count" Montefusco was part of the inspiration of my handle here.
Frank
Not a coincidence
Those posters who do not think message boards have a significant lasting affect on the share price are not afraid to post "negative" thoughts because they don't think it will affect the value of their investment, but may generate discussion that will help the poster better understand the risks and rewards of the investment so they can make investment decisions.
John, great point, it is also odd that most of the negative posters fall on the side that there is no effect on the stock price. Probably just a coincidence, LOL.
An IDCC ITC win and FRAND
IDCC would be in the catbird seat if they win at the ITC. Nokia will be banned from selling in the US. Could Nokia litigate FRAND? Of course they could, but while the case is dragging through the court system they cannot sell anything here. So they can either sign a contract and pay IDCC or they can watch their market share erode while IDCC plays the delay game with the legal system. IMO a win at the ITC for IDCC would bring about an agreement very quickly and at a much better rate. I know I'm in the minority here, but I hope IDCC does not accept a 60-70 million a year contract and instead gives itself a chance to get a patent upheld by the legal system so that licensing can become a normal business event. Until IDCC shows that it is willing to go to a decision the obvious strategy for any big manufacturer will be to litigate, delay and settle on the eve of the decision, receiving forgiveness for past infringement and a better rate than those before you have paid.
DClarke, very nice work. Thanks for sharing.
It's a very useful tool. One can plug in their own assumptions about Nokia and other new revenue sources, expected revenue growth and expense growth, and PE to project a future price.
Structuring growth into fixed rate deals
Revenue recognition is not something you can make up to suit your needs. The reason the contracts are recognized equally over the life of the contract is because under the accrual method of accounting, income is recognized when it is earned, not when it is received. Income on long term fixed price contracts are usually recognized evenly over the life of the contract, based on the assumption that the fee is earned based on the passage of time. However I believe that if one can show that the revenue is earned on a different basis then a different method of revenue recognition would be appropriate.
For IDCC, it makes perfect sense to record increasing earnings over the life of the contract. The contract can assume increasing sales when it is realistic, which is true of the 3G market. A fixed rate contract could mean that the companies have agreed on the expected sales volume and unit rate for the life of the contract. This allows both companies to have clarity on the contract amount and avoids disputes over sales of covered products. I hope IDCC is considering this approach for future fixed fee contracts.
There have been many comments about the undesirability of fixed fee contracts. Fixed fee is not a problem if the fee is large enough. What is important is the total amount under the contract. My problem with the fixed fee contracts after LG (which was a great contract that got IDCC a reasonable rate at a time when they were struggling to license) is that they have been for less than I expected based on the precedent set by LG. Apple, RIMM and Samsung are paying a much lower rate. Whether they paid us per unit or fixed fee isn't the issue, it's the total amount they pay compared to their total sales.
Thanks to all the reporters
Revlis, Ellismd and Techinvestor from the ITC, and Sammdogg and KAJO (with the help of his secretary) from the shareholders meeting. The selfless sharing of information is a great kindness and I appreciate it.
Nicmar, thanks for helping me find that quote from Sammdogg.
Please help me find this
I really liked how KAJ070 heard WM say "we have a line for NOK they have to come meet it or we go to a decision"
I re-read Kajo's posts and could not find that quote.
Thanks,
Frank