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Sorry not buying long and drawn out.
If Nokia wanted long and drawn out why would they settle with Qualcom. They already had an ITC victory over Q if I recall correctly.
No point in spending millions upon millions in a fight that may not be worth winning. Now that IDCC has significantly reduced what they were asking from Samsung a Nokia deal should not be far behind. Litagation is not good business. Not from IDCC or not from Nokia.
The judge already know offers were made from the first hearing. WM stated last yearthat Nokia has made offers. If you want long and drawn out you don't make offers.
I'm sure the Nokia's management is tired of seeing 7 figure invoices from Attornies who never resolve anything. I'd like to know what the 10 year litagation expenses were on Nokia's side. Add to the fact that they had to pay $253 million plus all the Lawyer fees and one can see that the sue, pay, defend strategy doesn't make a whole lot of sense unless you have a lot of wins and they don't.
Kind of like paying millions to a sub-500 pitcher. They never get you to where you want so you might as well spend the big bucks and get CC Sabathia.
Bottomline, my gut tells me both companies are tired of paying lawyers and the numbers are close enough now to get a deal done just like Nokia did with Qcom.
The company can finally start focusing on growing and building up shareholder equity. With 330+ employees how much focus and effort do you think were put into Nokia and Samsung liyagayions in the last 2 years? I'd say it pretty much dominated executive meetings and put a hinderance on getting number 3 (Mot) and Number 4 (SNE if that is the order) signed.
With the framework for Samsung done they only have to deal with Nokia. Nokia will get a very fair deal so if your expecting $2.00 per hand set you might as well start being disappointed. In the end nothing else will matter except EPS numbers especially in this horrific bear market. New opportunities, new deals, new technologies can now be the forcus with the number 2 battle out of the way. Kind of like the US fighting in both Iraq and Afganistan.
I don't think Nokia is going to the mat. They have a framework in place since last year and I beleive Judge Batts KO'd that deal. Now that she is overruled and QCOM/Nok is done they can get back to the table and resume talks.
From where I sit this is the best position this company has ever been in, period.
The handcuffs are off. The fact is the litagation costs and risks have been handcuffing the share price since the ITC process started. This deal minimizes both. I'm not worried about the day to day share price as much as I was worried that this deal would hit a snag. This moves the meter. $55 mil per quarter now equals $80 mil per quarter and if people don't see this now you bet your bottom they will see it when earnings are announced and they increase by 100%+.
Bottomline, todays price, press release, are not important. The important issue is the financials. The CFO made a great move in getting forward revenue which can be booked on a quarterly basis. When the analysts digest the numbers the mutual funds and brokerage houses will jump on board and this stock will start trading in a permanently higher range.
Get a grip.
Merrit and company did an outstanding job battling 2 giants whose size and resources dwarf interdigital. Have you not been following the last several years of litagation?
He got the best deal for the company. PERIOD!!!!
IDCC did not invent everything in the cell phone. Nokia and Samsung have been fighting tooth and nail to prevent IDCC from collecting for years. We finally are getting paid MORE MONEY than anyone has ever paid before and people are talking about bread crumbs.
As for NEC and Sharp they know the deal. Volume gets discounts in every single industry. Do you think that Walmart pays the same as everyone else. If you do the math properly in the end more $$$$ to the bottom line for shareholders mean more EPS and greater share prices.
Lets say NEC pays $8 million per quarter and SAMSUNG $25. Well that would be 3x more right. So SAMSUNG deal is adding .60 cents per share per quarter to profits and this is a bad thing.
Unbelievable.
Wake up and count the Dollars
Anybody who thinks this deal is anything but a 100% homerun for shareholders should sell now and put all the money in treasury notes.
No doubt about it this is a BIG WIN.
Understand where we were on July 8th
8-Jul-08 25.35 25.68 18.09 19.54 4,903,300 19.54
lost $6 a share and had the ITC lawyer siding with Samsung.
I say they got knocked down pretty good last year between the ITC lawyer and Judge Batts and to get a $400 million dollar deal is fantastic.
The $400 million dollars is the largest deal this company has ever had. All this is pure profit no cost of goods sold. So they gave up some bucks big deal. A bird in the hand is worth 2 in the bush especially in this horrible bear market.
No more doubts and no more $10 share drops. Now money mangers can come here and only have to worry about Nokia. No samsung shoe to drop will protect the down side that has been killing us for 2 1/2 years now.
When the next $100 million dollar buyback is announced we will now have a floor at $30 and never look back.
They made a great deal fo all shareholders, period.
Keep your eyes on the prize.
I have been waiting for the defining 3G license for the past 9 years. I thought LG was it a few years ago but no major (meaning $$$ major) 3G licenses happened since LG. I was sure that with LG signing Samsung would be next and had no clue that Samsung would fight tooth and nail before signing. Also, I was convinced that Samsung would not sign before Nov. 25th so I am somewhat elated.
That being said Insider buying is not relevant. These guys have skin in the game. No need for them to show the investment community that they think IDCC is a good buy. The LAST $100 million dollar buy back did that. The focus right now is 100% on next Friday or whenever this deal gets finalized. This deal should propel the company to new sustainable valuations. Something that we have all been waiting for for years. I'm not talking about Qualcomm valuations ($61 Billion) but valuations finalling out of the $1 or $2 billion dollar range.
These permanent valuations are only awarded by proving that revenues and profits are sustainable. Qualcomm's valuation will flucuate but it is not going below $50 or $40 billion because their revenue model supports the current market cap. We need to show the Investment Community that we deserve to be valued higher. The only way this can be done is by reducing expenditures and risks (lawyer fees and court cases) and increasing revenue (3G DEALS ).
In my opinion this is the make or break week for this stock for many reasons.
1. The Samsung 3G deal - First major 3G revenue difference deal since LG. This deal by itself moves the meter. For argument sake lets say it matches LG money. That would be $60 million a year and $1.50 profit to the bottom line. This alone can increase the Market cap by 50 to 100%.
2. Samsung 2G Money - $150 to $200 million in cash to a company that already has no debt and a great cash position. They will announce an immediate $100 million buyback which will again reduce the number of shares outstanding and increase the value of each of our shares.
3. Samsung Litigation costs end, litagation risks end and development cost decreases - The biggest equity risk in this Stock is bad court decisions. Judge Batts, Judge Lynnn, the investment community knows that court cases = risk. Risk is always a negative to an investment. By settling with Samsung we have eliminated the litigation risk and saved tons of unpredictatble costs hitting the bottom line. It is hard for an analyst to project how many attorney hours it takes to fight all these battles. Also, by scaling down development the company is focused on HOME RUN eps numbers. What would $20 to $25 million in profit per quarter translate to in PE ratios. That would get IDCC on the map and noticed by many fund managers.
4. The Bar is set - I don't think Nokia is going to continue the tooth and nail battle that they have been fighting for the last 9 years. They know who they need to fight and it is Apple, Rimm and Google not IDCC and Qualcomm. IDCC can help Nokia develop better products. Now that Qualcomm is under license and a fair or FRAND rate has been established by Samsung, Nokia and IDCC can design a win/win agreement and start working as partners.
In conculsion, now is not the time to worry about if the CFO buys a 100 shares. Now is the time to focus on this deal.
Good old fashion Arbitriage play
I thought that this is what would be happening. When a company gets bought out for a premium and doesn't movevery close to the buyout price an arbitriage play is buying the stock at the current price waiting for it to hit the buyout price.
This 45 day window is giving investors the opportunity to get in before the stock hits its target price. Problem is nobody knows what that price is. My guess is $35 but no facts behind that. Since there is only 9 days left the money people may buy all the way up to $30.
As for why payments are in 2009 vs. 2008 I don't think that had anything to do with it. Samsung and IDCC were ready to do this deal. Samsung needs to fork over some serious cash to get this deal done. IDCC gave them options on how to deliver the payments. They borrowed the bond money so they need to figure out where to take the $200 plus million from for the initial sign on as well as how the payments should be structured.
Bootomline, IDCC gets paid Jan. 9th and it prices somewhere in the $35 per share range.
Just want to clarify my statement that prior to the settlement I thought IDCC was too risky of an investment. I was not happy that this went doen to wire like it did. I contacted every person I had convinced to buy the stock and made them aware of the risk involved in a bad ITC decision. My take was that we would get a good decision and Samsung would continue to fight and after another year of delays maybe a settlement gets worked out.
That is why I was so elated to learn of the settlement. At least hundreds of millions in and millions of legal fees reduced. The only people that really made money in the last 8 years was the patent attornies on both sides.
So I'm elated that the fight appears to be over and the EPS will permanently rise. No more missing by a couple million and going back down to $16. I've had enough of the teens. It is now time for us shareholders to make some money instead of all the patent attornies.
Great post loop.
If I may quote from Wall Street!
Gordon Gekko: The point is, ladies and gentlemen, that greed, for lack of a better word, is good. Greed is right. Greed works.
Well, guess what? Greed doesn't work. Look at the crumbling of financial companies left and right. Citigroup, Bear Sterns, Merrill Lynch, WAMU, Lehman Brothers, AIG, Morgan Stanley, etc..etc..
Prior to the settlement announcement this company was not a good investment. If IDCC elected to roll the dice with the ITC and comes up snake eyes everyone here losses. Sounds to me like the settlement will be in the best interest of the shareholders period and if we leave some money on the table so be it.
This fight has always been about fair payment. Nokia has inventions and wants those inventions recognized so they fought IDCC and QCOM. They settled with QCOM in a WIN/WIN deal for both companies. Nokia got a good discount and recognitions of patents. QCOM got a long term contract, a huge check and rights to use patents.
This is business and Samsung and Nokia need to be partners in this business. The more they sell, the more IDCC makes.
In the long run litagation is no way to run a business. I'll be happy with the settlement knowing that it was the best deal they could get after an 8 year battle with Samsung. I'm not looking for $200 a share in the next year. I'm looking for consistant growing revenues and EPS and a consistantly rising stock price. We have not had this in my 9 years invested in this company and I'm hoping that this will take place in year 10.
Bottomline, they know what the best deal is now after years and years of litagation. Who cares if they could get another .10 cents or not get the deal done now and move on. These are business partners and these relationships need to move away from the courts and into the marketplace.
Nokia 118.0m
Samsung 52.9m
Sony Ericsson 24.8m
Motorola 24.6m
LG 24.1m
While the LG deal will be the framework for the Samsung deal in my opinion you can't just take the LG and apply the same multiple. Nokia and Samsung will get discounts based on volume. I suspect a structure as units go up price goes down. That way while Samsung will pay more then LG, Samsung will ge a better unit cost based on number of units. This will also help Nokia get done. IDCC can give Nokia a better deal than Samsung because Samsung doesn't sell the level of units that Nokia does.
As far as this statement:
I just hope we get a deal that we are expecting.
I want a deal. We had years and years of discussion with millions upon millions of lawyer fees. We need to get the best deal we can and move on. A WIN/WIN means you don't get everything you want but neither does the other side. The beauty of this company is that all dollars will go right to the bottom line. The time has come for some of those dollars to come permanently back to the long time shareholders in terms of share price appreciation. So from my perspective I'm happy that they seem to be getting the deal and moving on to the next 3 companies on the list. Nok, Sony/Eric and Mot.
We will have no shortage of mutual fund buyers if the deals come in. The funds that focus on dividends are usually large cap value or large cap core funds. Tons of Small cap, mid cap and all equity funds would love to pick a 2 to 3 bagger now.
When I spoke to some of these fund managers about IDCC the chorus always seemed to point to litigation risk. This risk can not be accurately predicted case in point Judge Batts.
Notice that the message in the press release
"InterDigital, Inc. (NASDAQ:IDCC - News) today announced that InterDigital Communications, LLC and InterDigital’s patent licensing subsidiaries have entered into a binding term sheet with Samsung Electronics Co., Ltd. and its affiliates, including Samsung Electronics America, Inc., that resolves the outstanding arbitration issues involving Samsung’s sale of 2G products, as well as the 3G patent licensing disputes for Samsung’s sales of products through 2012.
Sounds like no more litigation to me. This will bring fund managers on board. Loop is "spot on" (couldn't resist with a banner of Palin looking at me) with the statement that the DEC. 17th hearing involving 2g money will be delayed. The good thing is many, many eyes are watching and when the ink is dry and all the Samsung law suits are gone these fund managers will come here with cash in both fists.
First, dividends in this market are basically useless.
Second, people invest in small growth companies to see share prices go up. A buyback will reduce the float and increase the earnings per share. You want a dividend go buy MO. I like buybacks when they are well executed. The new CFO did a good job on the last one, the old CFO didn't.
Merrit has been very clear as to the goals of the company. Get the top tier signed. The execution of that plan has taken a very long time. Back in 2001(I think) Samsung and Nokia had a summit which was speculated that they formed a strategy to battle IDCC. I believe this battle is over. I was surprised when Samsung signed. I fully expected them to continue fighting. IDCC and Samsung finally agreed on a WIN/WIN deal. We may not get everything we want but it was certainly about time to put an end to multiple years of court fights and millions of dollars in legal expenses on both side.
I'm pretty much convinced that the Nokia battle is over also. Nokia needed Samsung to set a framework so they can structure around that deal. Also I do not think Nokia wanted to settle before they finished up with QCOM. The English law suit settlement was Nokia's first sign that they are also tired of these suits. With QCOM?NOK signed and Samsung/IDCC done I do not believe Nokia is going back to the ITC. No point. IDCC will build a WIN/WIN deal with Nokia.
Forget Cisco and QCOM. This is all about Samsung, Nokia, Sony/Ericson and Motorola, in that order.
Lastly, IDCC is receiving a proper valuation based on todays EPS and revenue numbers. That is why we have not seen any upgrades yet. It has been a painful 8 year wait for anyone who has been trying to guess when NOK/SAM dollars will hit the bank. Many of the analysts covering this stock have been burned by trying to speculate new EPS numbers based on settlement values. For them it will take a show me the money event like when the check is in the bank to put out new projections. That is when we will see a permanent market cap change. We may not get to $2 Billion on the Samsung deal alone but we will certainly get past that number when Nokia signs.
The share purchase plan is over, let it be.
It is a good bet that come Jan. when the check hits the bank a new share repurchase plan will be implemented. You know that heartland will ask about it. They have been requesting repurchases for years. Unless IDCC sees some strategic buy as far as companies go they will invest in shares beleiving that it is the best place to deposit cash.
I belive that 2009 will be focused on delivering shareholder value (it is about time). They clearly are financially focused which is a very good thing for us.
From Bill Merrit
And since gaining scale at the right prices by no means of certainty we are in parallel evaluating other options for the modem portion of our business. The path we chose is the one that will deliver the highest shareholder value.
The modem business acted as very strong proof of concept. From where I stand the company is focused on reducing expenses (legal and development) and increasing revenues (Samsung deal). Mt belief is everyone is tired of this yo-yo market cap between 800 mil and 1.2 billion and it is time to pemanently move to a new range (2 Bil +).
I think we will see the Samsung deal to be structured like the LG deal with 3 lump sum payments for the next 3 years. Add that to the virtual disappearance of legal fees (now that Samsung settled I do not beleive Nokia will go forward at the ITC) and a reduction in R&D costs and bingo, we have great EPS for years to come.
I'll hold off sending a congradulations to Bill Merrit until the ink is dry but in my opinion this a very good event and I do not think it should "merrit" (pun intended) negative speculation.
At the end of the day who cares who wins or loses in court as long as IDCC gets paid. I beleive these last 2 years each side has be moving toward the middle and that is how this agreement was made today. I do beleive this is a good faith agreement by Samsung to enter a license and the delay probably has to do with cash flow and more number crunching.
Way back in march IDCC releases this tidbit about Nokia negotiations.
Item 8.01 Other Events.
Nokia Updates.
1. Nokia Corporation and InterDigital are in settlement discussions and have made substantial progress towards resolution of all disputes between them.
Then today's message
On November 24, 2008, InterDigital, Inc. ("InterDigital") issued a press release announcing that its wholly-owned subsidiary InterDigital Communications, LLC and patent licensing subsidiaries have entered into a binding term sheet with Samsung Electronics Co., Ltd. A copy of the press release is attached hereto as Exhibit 99.1.
My take is that these two agreements (Nokia and Samsung) will be very similar. All three companies feel it is a waste of money to continue paying huge lawyer fees. Sometime is Jan. Samsung will deliver the 1st of 3 really big installments for a comprehensive 3g/2g license (I don't care if it is 1 or 2 agreements and long as a big check comes with it).
Nokia already settled with Qualcomm. If they wanted to continue fighting these IP wars they would have never settled with Q. I'm also thinking Nokia is very aware of the Samsung framework and they are busy right now putting together a framework for an IDCC/Nokia deal.
Today will be remembered as the end of the IDCC IP war.
When the Check(s) start rolling in the price will be right ahead of it. Until then we will probably move with the market.
I stand corrected we do currently have many mutual fund managers involved but...
8-Jul-08 25.35 25.68 18.09 19.54 4,903,300 19.54
7-Jul-08 25.82 25.84 24.75 25.26 722,700 25.26
This move should have never happened. These 25% haircuts and mass selling should be reserved for severe earnings misses and real fundamental erosion in the market share. Not an opinion by a single staff attorney 1 year on the job.
I spent the last 4 years talking to mutual fund managers and brokers about investing in IDCC. Litigation risk was the number one barrier for them. No way to really control it. You can research inventories or do store checks and talk to vendors and customers when trying to understand a company that you invest in sales. But no one could predict that Judge Batts can throwing a monkey wrench into a process that seemed headed for resolution.
Bottomline, I've been a very strong bull for the last 9 years and I still am. But the constant litigation is never good for the shareholders and Wall Street knows this. I just hope that Merritt can get creative enough to put this long running fight with Nokia to an end.
Crammers Comments
The share price right now at $20+ with market cap at $900 million has us priced as a litigation company. That is why Crammer rang the beng to sell. With all the great successes APPL, RIMM, LG, HTC & NEC we will never get away from the litigation lable until we get a deal done with Nok or Sam. Also the stock will continue to be priced with litagation risk. Just think one opinion by a 1st year staff attorney destroyed hundreds of millions of dollars in market cap. That is not the type of investment mutual fund managers want to be involved in.
Nokia is in the business of selling cell phones not managing court cases. The QCOM concessions is what they wanted and that was the reason behind years of battling. I hold an opposite view. I think that Nokia has no more reason to continue to waste time and resources fighting IDCC. At some point their best deal will come out and I hope we grab it.
Hopefully, the parties will all tone down their egos long enough to settle their differences so all can prosper at the same time for their contributions.
Well the UK settlement was a step in the tone down.
Last year when we were all sitting here counting our dollars from a Nok/Sam settle Tom Carpenter put a not so fast report out stating that he beleived IDDC would not settle with Nokia prior to Nokia settling with QCOM.
Now that that event has occurred we are one step closer to settlement. Merrits got to be feeling heat right now and the next CC will be one of the most important one of his career. In the past I've publically stated that I thought he was refreshing honest and candid something that was lacking in the CEO world. That honestly has put two big feet in his mouth. Foot 1 ITC will go smoothly Foot 2 these cases normally settle before trial.
Now I hope he is working this weekend studying the Nok/Qcom settlement and trying to find a win/win situtation for IDCC/Nok. When the 8K was announced earlier this year that substantial progress has been made with Nokia, I beleive that the framework was done and they needed to get Qcom done before they would go forward. 8K's are legal SEC documents and unless you want to end up in jail, the CEO and CFO will not put false statements in them.
I hope that we do not continue to "Roll the dice" with all these court cases. The landscape is the landscape. Batts could be overturned or she could not be. The ITC can ban or they can find no violation. The time for running the business based on court rulings should be over. QCOM reduced their rate. Samsung and Nokia are offering money now to IDCC for 3G.
Qcom and Nokia got creative to make sure both companies benefited. It is time for IDCC to get creative with Nokia and put this legal game of Global court fighting to an end and everyone just focus on making money.
Carpenter had no choice in his downgread.
He put his butt on the line thinking that the staff report would be favorable. IDCC gave no indication that this ITC hearing would be as difficult as it is. Coverage is a double-edged sword. When he was wrong on the staff report he had to downgrade to maintain credability. He predicted a 5 to 10 point increase going into the hearing and was accurate. As soon as the staff went againts IDCC the points came out of the stock.
I think it is time to sit and wait, yet again. I don't know what IDCC has up its sleave but I hope it is a pair of Ace's. It sure makes sense to setlle with at least one of the $100 Billion market cap Gorillas then continue to fight tooth and nail. I'm sure we don't have all the facts and I'd like to give the company the benifit of the doubt but all I keep thinking is the phrase "A bird in the Hand".
Jim,
I have to put my cheerleading pom poms down for this post.
Today was a very bad day pure and simple. I've been critical of your posts about news of late but this time I'm siding with you on the handling of the staff report. We were caught with our pants down skid marks and all.
Wall street is all about managing expectations. Chanmbers from CISCO is one of the best. Never give too good of a view because when you are wrong you hurt a lot of people. When you give to bad of a view you are just plain stupid and the board fires you. So be just consevative enough to look good when the numbers come in.
The mistake here is about not properly managing the expectations of the staff report and the ITC hearings. The same kudos Bill gets for being optismistic can turn around and bite the company big time like today. The meesage was clear from day one that this is where we want to be and this would be a victory. Now we still may win but it sounds like it is SAM 17 IDCC 0 after halftime and the shareholders had to spot 14 points to the underdog SAM.
The good news is that there is still a lot of football to be played. I sure hope TC doesn't slam us tommorrow. I'm sure he is pissed and rightfully so. He was strongly guided to the idea that the staff report would be a victory for us. Now he has to go back to his investors and say he was wrong yet again on this stock.
Anyway you think I can call in work sick with IDCCITIS.
Long Tern Frustration and the Microsoft Factor
No one can blame long term shareholders for being frustrated with the near deals and rollercoaster share prices over the years. Always waiting for Nokia or Samsung to sign. Hell we were all convinced in 2000 that Nokia a phase II contract was right around the corner. Then in 2003 we were told that Ericsson was one of the good guys and a 3G framework had pretty much be done. We all have friends, relatives and especially wives that are tired of this story. We all probably sound like lunatics waiting for a ship that never comes in.
Under normal circumstances I would say that this is an execution problem which management should be blamed. But this is far from a normal circumstance. My theory is closely aligned with Kent over at Atomic Bobs and I’m calling it the Microsoft Factor.
I’d like to give people a little history lesson if I may. Early on Microsoft invented next to nothing in the PC world and grew to a $250 billion dollar market cap. Gates and Allen had written a basic language complier and were shopping it to IBM. The original inventor of DOS skipped the initial meeting with Big Blue execs so Gates hired his programmers and was able to deliver DOS 1.0 to IBM. Now along the way Microsoft has not bought companies or licensed technology they just took what they wanted when they wanted and left dead or dying small cap companies behind like when a horse takes a dump on the road. Wordperfect, Lotus, Netscape, RealNetworks, Novell, Borland, etc.. Did MS invent windows or copy it from Apple who copied it from Xerox. How about Word or Excel.
They did this in amazement to me because they have always had substandard products. Imagine is their were a ctl-alt-del keys in your car and it stop working on the highway until you hit all 3 keys and waited for it to reboot.
So why the long History Lesson? Nokia and Samsung would like to have IDCC be road kill just like Microsoft has killed off all of the inventors of the technology that they sell.
When you look at this battle this isn’t about fair deals it has been about no deals and extinction. They want IDCC extinct the same way Microsoft wanted Netscape extinct.
Somewhere along the way IDCC figured this out and knew the way to prevent this was to;
1. Build the best technology possibly and bundle it in a product form which would expand their customer base and demonstrate the power of their inventions.
2. Establish key partnerships with companies looking to gain market leadership by innovation, LG, HTC, APPL and RIMM.
3. Use the ITC as a defense against Nok and Sam from selling products on America soil. They needed to wait until 3G products were actually sold here before taking this action.
So why am I finally so confident now?
When Nokia finally came to IDCC with a number earlier this year they finally gave up on goal number 1 which was extinction. They may be still hoping that QCOM will come around and buy IDCC and take the problem off their hands like AOL did with Netscape.
Also RIMM and APPL are becoming the new leadership in the wireless world leaving NOK and SAM scrambling to keep up. It will be very hard for Nokia to stop the momentum of Apple in 3G.
Lastly the ITC wants to move unlike the ICC. They do not tolerate BS and keep a very tight schedule. All one has to do it look at what happened to RIMM with NTP a couple of years ago and realize that the ITC has teeth and will bite.
Well happy 4th everone. I’m glad Jim’s back and let’s hope for some fireworks next week.
Thanks for the compliment Danny, right back at you.
Much of my confidence in this company stems from Merrit. I do not know if you have had the pleasure of ever meeting him but in my opinion he is the real deal. I've listened to many CEO's over the years squeal and whine and blame everything under the sun for why the company did not execute. I find Merrits candor very refreshing. He takes the time to give honest opinions of situation with out the typical CEO shuffle and script driven responses that other CEO's give on conference calls. His fault has been his over optimism but I want the leader of a company that I'm invested in to beleive he can get it done. I also beleive he has learned how to play this game and is doing a fantastic job. IDCC is simultaneously battling 2 companies 100 times its size or $100 billion dollar market cap companies to a $1 billion dollar market cap. If anyone has followed the dead small cap companies that MSFT has left behind on the journey to become a $250 billion monster you can understand how well IDCC has done so far.
I do not think that everyone really understands what is going on. People beleive it is IDCC vs. NOK or SAM or SNE. Kent over at Atomic hit it right on the head. This isn't about licensing. This is about a collusive group trying to make sure IPR owners are slotted or allocated revenues based upon what they invented. People think Nokia went to England to invalidate IDCC IPR. IMO they went to England to figure out or make a court prove out essentiallity in order to negotiate rates.
Business is Business no emotion period. Nokia wants to be able to control its costs and not have them dictated to them by the market or by a court. Everyone slammed Carpenter last year when he said their would be no settlement because of the QCOM/NOK dispute and he was absolutely right. So I see light at the end of the tunnel. Nokia and Samsung will settle when it makes business sense to do so. According to Merrit Nokia finally made a offer. Coming off of $0 is a very, very big step. Settling in court in England is also a big step. In order to kiss and make up you have start by stop fighting. Today we have a little love fest going on between Nok and IDCC nad the market rewarded us for it. Up $1.28 or 5% when the NASDAQ gets killed by 53 points.
The Playbook
I've been involved in small caps long enough to know that news moves these stocks up and lack of news allows them to drift down. So many times people rush out and buy on the news thinking that the stock will continue to climb only to see that a few days or weeks later they lose 10% or more of their investment.
This company and rightfully so wants no part of news driven price appreciation. Been There done That. So while it may seem frustrating to a shareholder that they release news that does not contain the names of the companies involved I believe that this company has a solid business plan and is executing it.
After reading all the posts last night about the unnamed chip deal I thought about what business purpose it serves to name and put out detail about signed deals. Also all the compaints about the details in the Apple deal. Hey, how about if we publish the contract so Samsung can pick it apart to make a better deal. Revenue and earnings will move this stock just as revenue nd earnings move all stocks. So why should IDCC give details to their competitors or map out battle plans to their unsigned advisaries. Just maybe they do not want these groups to know the inroads they are making in China. They have a playbook and they do not want everyone to see it. Smart business if you ask me.
After today's deal Samsung is now wondering if Nokia and IDCC have a framework in place. If Nokia will sign before Samsung goes to trial thus making IDCC deal that is on the table be pulled. Think about it. If Nokia signs first their will be no need to give Samsung favorable terms and vice versa. Sounds to me like the shareholders are the only group of people that are guessing right now.
Bottomline all the noise about lack of information is just impatience and frustration. We as shareholders have very, very good reasons to be impatient with the lack of any sort of market cap appreciation over the years but if we ever had a reason to be patient and have faith in this company now is that time.
Jim,
I'm confident because of time and research. I've lived this game for the last 8 years. I've read every analyst report, every court document, grilled Janet every 3 months for the last 4 years, listened to every conference call and followed many other companies in this sector, AAPL, RIMM, BRCM, QCOM, SWKS, NOK, MOT, etc and read all of the reports on those companies. I've also spoke with many equity managers to learn and understand what they look for and when they buy and why they sell.
I think I understand the world of small caps and we have been stuck in small cap hell.
The best performing asset class prior to the last year has been mid caps at 14% per year return. While small caps average 12% once a company reaches mid cap level chances are it keeps going until it hits large when the growth may slow.
So after 8 1/2 years of seeing my money go up and down like a roller coaster and always vomiting on the ways down why am I so confident now.
This play has always been about 3G and 2G has always been gravey. We all knew that the Smartphone/Computer would arrive when the data speeds in the US caught up with the rest of the world. Right now the 3G Smartphone and Data card markets are showing explosive growth. No where in the technology field will you find year over year growth in numbers then in the Smartphone market place.
The Smartphone revolution has arrived and Apple has raised the bar with the proper operating system environment. Jobs does it yet again. Not only has he produced the best mobile OS in the world but he created an amazing distribution systems via iTunes and revenue sharing agreements with the wireless providers. One of my favorite stories was seeing that Apple, AT&T and Starbucks in a partnership to build digital wifi distribution centers.
About 2 conference calls ago Merrit finally said enough about litigation they will settle when they settle the real story is about the innovation and the ability to send data at the fastest possible speeds. They also adjusted the investor presentation to basically say "Look we will get 100% of the 3G market place licensed and will earn somewhere between $1 and $2 a device". Very broad very general statement and no lines in the sand basically stating to Nok and Sam yeah we know we get $2.00 now but we will probably have to settle for $1.00.
The company is not focusing solely on Sam or Nok. They know that eventually after all the games have been played that a fair license deal will be made which makes sense for all companies involved. They understand that these companies will become their business partners so their will be flexibilty and concessions.
So I lost a lot of money today. I've made a lot of money on the last run. It does not matter as long as in the end we exit small cap hell and get into mid cap heaven.
Frustration
Jim,
I know your continual referal to news is pure share price frustration but the real fact is that earnings per share and earning per share growth drive price appreciation, period.
News and the way it is released can have temporary affects on stock prices. We have had our share of temporary bumps and we need permanent ones.
The real money managers look at fundamentals not stories. When they commit they do it after intense research and do not like unknowns. Right now they can not predict what will happen in the SAM/NOK/SNE situation so they will wait and miss the first run up and be ready for the next wave.
Apple for example. Apple has a $147 Billion dollar market cap. We are at $1.1. When Merrit and Jobs are in a room and Jobs (or the people representing Jobs) says this is what you can say the little engine that could (IDCC) says yes sir.
Merrit was grilled at length by Carpenter about the Apple license as well as the RIMM license and he basically stated that these licenses would be paying within the range of everyone else. He stated it would be foolish for the company to sign a license that is under value with the ITC investigation going on.
It is very ugly on wall street right now. Financials are the crapper. Look at Citigroup, Wachovia, Washingtom Mutual all at multi-year lows. The NASDAQ is cold and RIMM's missing is taking its toll on the wireless sector.
Gas and Oil needs to retreat in order for this market to get back to some sort of normal cycle. People are scared and every equity except oil and commodities are suffering.
Bottomline, We are in the final days of a 20 year texas hold em game. I'm all in and playing the cards that I have. No need to get cold feet now. I just hope we all get to say
READ EM AND WEEP LOL
Toll Collector and Patent Troll vs. Wireless innovator and Technology Leader.
My days following this stock are certainly not as long as yours but I strongly beleive that this company has gone trough a transistion under Bill Merrit.
No knock on Howard but I feel that Merrit understood that he could not just sit still and collect money for past inventions. He needed to build products to demostrate the ability of these innovations. In my opinion he has shown to be flexible and make deals happen. In listening to him over the years I've found him to be truthful and enthusiastic so I do not beleive the hold up on Samsung is the "Gotcha" contract and arbitration decision on 2g. I beleive this is about 3g pricing and the money going forward. I also beleive that an independant arbitration panel spend 2 years coming up with a 2G number. This was the process that both parties agreed to when the contract was signed and this is the process that both parties need to live with.
Bottomline this deal will happen when the 3G price comes to the middle. Samsung put IDCC's technology in their phone via IFX's chipset is a telling sign IMO.
Loop
I have to bow to your knowledge post 2000. I bought in Sept. of 1999 and did not know the history prior to that time frame.
No easy deals here.
I think that Merrit and Company have been trying everything under the sun for the last 8 years to try to get these guys signed.
IMO, The only reason if that they don't sign is that have historically they (NOK & SAM) not been willing to pay anything near fair market value.
Why is it that NEC, LG, HTC, RIMM, AAPL, SHARP, SANYO, TOSHIBA, etc, etc are willing to pay and SNE, SAM, NOK and MOT are not? This is about establishing the market price and SAM and NOK will not concede that the price has already been established.
The combined market cap of NOK and SAM is over $200 billion dollars, IDCC is a little over $1 billion. That is one hell of a David vs. Goliath story. And you have to admit that IDCC has been doing pretty good against those odds. Kind of reminds me of the movie 300! Tonight NOK and SAM dine in hell. LOL.
So the deal will get done when SAM or NOK start to look at the current market price for IDCC IPR and accept reasonable discounts based on their volumes. When that event happens I'm sure Merrit and Co will put a deal together that makes sense,5 year 10 year or whatever year.
Bottomline, NOK and SAM have been using their enourmous wealth and legal power to push IDCC around for years hoping that they would either go away or accept cents on the dollar.
Sooner or later someone will say uncle and I I don't think it will be IDCC.
Nok or Samsung have not given any indication that they were prepared to offer anything near a market rate setllement in the last 8 years. That being said why do you think giving then a deal on 2g would help?
I you assume that SAM wants to deal fairly then you have a point, IDCC should give up some 2G for a 3G settlement but all indications are that SAMSUNG wants to hold its breath until they turn blue.
Nok and SAM clearly have a pact not to settle with IDCC until NOK gets QCOM to reduce its rates and that up until now has been the main reason for SAM not settling. Why else would NOK come to their rescue in Jan. moving up their own hearing by two months.
Now with Nokia out we may have a shot and I think Merrit would give up 2g to get a 3g.
We will see soon I hope.
What does it take to wake them up?
No company can manage based on day to day stock prices. All they can do is lay out a business plan and execute and that is what they are doing executing.
I don't want Merrit concerned with anything but getting deals signed for the right terms and building the best and most innovative products that they possibly can.
The rest will take care of itself.
The problem is this company is so predictable and Wall Street knows that and can place the shares were they want.
Maybe the small guys on Wall Street will play games but when the big boys get here the games will be over.
This company is anything but predictable. If it were we'd all be rich by now. LOL.
This is a long hard fought battle with 1 David against not 1 but 4 Goliaths. I've been impressed with Merrit since the day he took over the helm. With NOK and SAM having deep pockets and teams of lawyers on retainer I think this little engine that could has done a pretty remarkable job.
Think about it, this company is battle proven. SAM and NOK have been not stop legal wars since 2000. Without the collusion of between these two we would be sitting pretty.
The early NEC, SHARP and SANYO deals established our 3G IPR.
The LG deal gave a steady revenue and EPS stream.
The NOKIA arb win should have provided us with a huge war chest if our old CFO/Bookkeeper understood how to execute buy back and didn't blow the wad like a druken sailor with a fistfull of dollars at a hooker house.
The facts are clear. If APPL and RIMM understand the need for the IPR (in fact one can state AAPL have the best IP lawyers in the industry) why can't NOK and SAM.
Merrits focus on product is bringing in results and recognition. Now people can actually see the inventions and the metrics behind them.
Nokia and SAM are not defeating IDCC they are just continuing to postpone the inevitable.
So $19 to $27 to $24 BFD.
The difference now then in previous years is that we have the top two dynamic handheld companies in the business AAPL and RIMM signed. These guys are taking market share from NOK and SAM and are paying IDCC. So as they win 3G business from NOK and SAM more money will flow to IDCC and they will continiue to spend money and fight until they decide that being innovative is the way to profitability not just being an 800 lbs gorilla.
Don't worry wall street will show up as the revenues grow and the more deals they sign the more permanent quarterly revenue they will receive.
My guess is SAMSUNG caves before the July 8th trial and we never see under $40 again.
The RIMM Shot
9 years of waiting may very well come to an end in the next 2 weeks.
Most of us here have been in small cap hell waiting for this to take off. Our spouses, friends, relatives, etc.. etc.. are probably tired of waiting for this story. We've had several false starts the 2000 baby Qualcomm run, the LG deal, and last one was the Nokia 2g settlement. If I may borrow a line fromm a Godfather movie "Everytime we try to get out (small cap hell) they pull me back in".
Now some people can look for off shore boogie men hired by Nokia to suppress the share price. Or forces of evil within the markets focused on keeping this down. All crap if you ask me. Why are their 7 million shares short? Because they made money before and they think they can make itn again. Wall street is about making money.
Real sustained price and market cap movements are tied to revenues and profits. Right now IDCC is trading at about 4 to 5 times yearly revenues or the same multiple as BRCM. Everyone whom has tried to put NOK or SAM settlement revenues for the past 8 years has failed so everyone basically stopped. I have to hand it to Carpenter it takes guts as an analyst to stay with a stock for this many years and not have the stock perform.
If we get a Samsung settlement prior to the July 8th hearing the stock will trade up 15 points before any one can touch it.
Why? Because of the numbers. First any Samsung settlement will include every single dollar of 2g money. Just like the NOK settlement it makes no sense to give up court confirmed money that the company fought years to obtain. Next is the structure of the deal. Start with the LG deal and add substantial amounts on top for more volume. The LG was $285 million we can expect the SAM 3G deal to be in $400 to $500 million dollar range over 5 years or $80 to $100 million in new revenue plus $200 million 2G gets you about $600 to $700 million dollars.So $100 million in pure profit per year minus Samsung's yearly attorney bill should equate to at least $660 million of market or $15 per share. BOOM $27 to $42 before you can say BOO YA!
So while I'll stop short of predicting a Samsung settlement, I will predict the impact that a settlement will have on the permanment market cap just like that day when RIMM joined the big boys with a 23 point move.
23-Dec-03 58.50 69.93 58.30 69.61 350,252,400 11.60
22-Dec-03 45.29 46.72 45.01 46.10 26,895,600 7.68
My first post in 4 years. Feels good to be back.
"Everything else is just noise. If SAM doesn't settle, we get no ruling from the CCA or ICC, then watch out for a sell-off. How bad it will be depends on a lot of factors."
I think the ball game is very different now.
On Feb. 7th RIMM was $82 now $147.
On Feb. 26th AAPL was $116 now $180.
We are now tied to the new technology wave, 3G.
The street now knows the more RIMMs and iPhones sold the more revenue IDCC will generate. None of the SAMSUNG or Nokia money is priced in. This run is about future revenues from existing licenses, IMO.
Look at the market right now. Banks and brokerage houses continue to get killed. How about health care HMO's down 50%.
The only place to invest has been oil and commondities and that is becoming a very risky game.
So money is finally flowing into the wireless sector. Equity managers need to buy equities and right now this is the best place to buy and the only market that has good solid growth. Look at BRCM and QCOM going from $17 and $38 in march to $27 and $50 in June.
Nokia and Sam are no longer if but when. And when they sign we will see huge run ups like RIMM when everyone found out that the revenue was real.
23-Dec-03 58.50 69.93 58.30 69.61 350,252,400 11.60
22-Dec-03 45.29 46.72 45.01 46.10 26,895,600 7.68
That 23 point day was never given back so Dec. 22nd 2003 was the very last time RIMM traded in that price range.
Wall street isn't dumb they just don't like being early to parties. IDCC's market cap as of today is $1.2 BILLION.
My belief is that we start with a $4 Billion dollar Market cap and go up from that point.
It reminds me of the old joke. A man asks a woman if she would sleep with him for $1 million dollars. She says yes. Then he says how about $10. She says what do you think I am. He says we have already established what you are now we are just haggling over the price.
NOK, SAM, the ITC, IDCC know that these guys will pay. Now it is just about the price.
My3sons,
In my old Bronx neighborhood we have an expression.
"Money talks, Bullspit walks".
had to clean that up a little if you get my point.
Ok, let's see a signed deal with real money with Nortel then.
That is a bad question and not the point. They get their shares through incentives and rightfully so. I want these guys to have shares and I'm not concerned about whether they are granted or paid for.
The point is SALES. Every companies main focus. In a growth company you need GROWING REVENUES . If these sales teams are being compensated for lackluster 2004 performance then this is a mistake. A mistake that cost the shareholders of this company MONEY.
How many salesmen would go about and bust their butt on the street if their compensation would be the same?
With the new season of the apprentice coming up this week I wondering if anyone on IDCC's sales or business development team would make it pass the first round.
I do not doubt their intentions, if I did i would not be invested here. I have doubts about their ability to close deals.
The most difficult task in any business is sales. That is why salesman make the most money. Trying to get someone to part with cash is extremely difficult to say the least espescially in this case where IDCC is not perceived as providing value and is viewed upon like a tax collector.
My biggest problem here has been execution. It seems that the timetables are always pushed back for one reason or another. Last minute bail outs, waiting for the right deal, not wanting to do "what is best for the company". Seems to me they know more about the timing of when to sell shares then they do about the timing of when to sign deals.
I like to think in terms of bottom line. Either get things done or move over and bring in new blood who can. At some point the sales and business development teams from this company need to be called on the carpet. Sales in all companies is a "what have you done for me lately" job. Companies can not survive on last years deals.
Another month of silence.
I've stopped recommending IDCC to my friends and relatives. It has been very embarassing to say the least. All the people I've gotten involved I've told to hold on and wait for Nokia but at this time IDCC is not giving anyone a reason to invest in it so neither am I.
My biggest problem with the no news is bad news situation here is the devaluation of IDCC's stock price caused by the executives themselves. They probably overestimated their abilities to sign new deals when they decided to create the $7 million dollar stock incentive plan. The fact is now IDCC is barely at breakeven .02 cents and at least one analyst has a negative EPS forcast for this quarter. (Low Estimate -0.02).
If IDCC had .20 cents per quarter earnings a .04 cent per share hit with have little significance. I believe without the incentive plan cost of .04 cents per share the current share price would be at levels prior to this quarters earnings announcements, $17 to $18 a share. The trading range is now $15 to $16 based upon breakeven to loss forcasts.
My point is that in this environment a stock with .02 to .06 cents per share earnings is viewed and valued differently then a stock with -.02 to .02 earnings. IMO, that .04 cents cost shareholders about $2 a share in value.
Right now managment MUST give investors a reason to buy this equity by advancing this business plan which appears to be stuck in neutral.
I do a lot of numbers analysis when I invest. I use revenue as a model and a "price per share" of what that revenue is worth.
In IDCC's case the quality of the revenue is extremely high. Their is no cost of goods sold, you can not find a better model anywhere, that is what makes this investment so attractive.
The only comparative company is Qualcomm and their revenues because of chip sales have a cost of goods sold. You can almost discount the CGS to have QCOM revenues compare to IDCC's.
Last Quarter QCOM had $1.34 billion in revenues with $370 million in CGS. The market cap of QCOM right now is $62.7 billion. At a yearlyly projection of $5.4 billion in sales that means they are trading at about 11.6 times yearly revenues with CGS and about 15 times revenues if you take out the CGS of $1.4 billion.
Right now IDCC is priced at a market cap of $870 million with about $120 million in yearly revenues. That is about 7 times revenues and about 50% cheaper than QCOM's revenues with CGS and 100% cheaper without QCOM's CGS.
So the long answer to your short question if NO.
Without the loss of a major customer I can not see IDCC taking a 10 point haircut even with a loss to Nokia. That would equate to a market cap of $330 million dollars for a company with 1000 patents and $125 million in cash.
The approximate date of the next CC is November 10th. By that time I really can not see IDCC priced at this level. Wall Street speculators will not allow themselves to be blind sided by an upside surprise with Nokia in Jan and Samsung in Feb. Unless their is a delay we should break $20 by then.
Look at RIMM on Sept 5th.
5-Sep-03 27.90 28.64 27.74 27.85 914,100 13.93
It almost doubled in price before it ran from $46 to $69.
23-Dec-03 58.50 69.93 58.30 69.61 58,375,400 34.81
22-Dec-03 45.29 46.72 45.01 46.10 4,482,600 23.05
I have to disagree here.
"I believe IDCC mgmt will never truthfully cover with us,"
I never felt the team was not being truthful. I think they always have believed that they are doing the right thing and are just reporting the situations to us as they see them.
The problem is the other guys. I believe this game to be quite ruthless and not very honorable. I think "Nice guys finish last" when it comes to IP licensing.
What may be happening is IDCC underestimating the lack of ethics that other companies have. Nokia is a perfect point.
When the contracts were signed IMO, IDCC believed Nokia to enter into the agreement in good faith and it was understood that Nokia would pay a rate. Now, Nokia wants to use whatever legal mechanisms they can to not pay.
Is this ethical?
Doesn't this sound like it is totally against the intent of the contract when they signed it?
Same goes for Samsung. They had a clause in their contract to protect them from paying more. Now they wish to use that clause to get them to escape from paying altogether.
The problem is not honesty, the problem is dishonesty of the opposition.
It almost seems like IDCC management is playing by Marcus of Queensbury rules in a boxing match and the other guys are street fighting.