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Good points enyaw, do we receive the 2G award, now that samsung will soon no longer dispute it?????
Also the 8K says "InterDigital, Inc. anticipates recognizing revenue associated with the agreement ratably from January 14, 2009 through the expiration of the agreement on December 31, 2012.".
Ratably is defined as "made at a proportionate rate; as, ratable payments".
So, does the 8K statement refer to an expectation of additional revenue at a rate for the 4 year period, maybe if their sales surpass a threshold or some other criteria???
As long as we have waited to be fully compensated for 3G, I'm surprised we are not all in the wacky ward.
Cell Phones: From Brick to Slick
Cell phones have come a long way from the first unwieldy devices with 30 minutes of talk time to today's internet-enabled multimedia smart phones. Here's a look at some of the influential handsets in the evolution of the cell phone.Next >
1 of 9 pages
http://tech.msn.com/guides/slideshowcollect_phones.aspx?cp-documentid=10398316&imageindex=1
Happy New Year to all from Atlanta
we also need the co. to quantify a revenue stream, once the deal is done
Catchnrel, a couple of posts by Olddog on the subject
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=33492070
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=33741283
A throw at the dart-board
If they settle with Samsung and significant terms can be quantified, I hope we “soon” are over 30-35. Here’s why (invite anyone to correct or comment)...
ASSUMING
70% Less in Legal costs (now at +-67m; after tax save 31m)
Expenses (as in cost of doing business) go from +-200M to 250M
43.2 Shares Outstanding
Cash now at 180m
150m for 2G Samsung arbitration
150M+180 Cash at 7.6/share
Exclude any real or potential revenue besides Samsung and Nikia
AFTER TAX REVENUE & EARNINGS (Sam & Nok sign at +-$1.25/ phone)
Cash at 330m or 7.6/share
Earnings per share for present Licenses .50/ share
Savings in Legal at .70/ share
Samsung Revenue at 98m
Nokia Revenue at 263
Samsung Earnings after tax at 1.30/ share
Nokia Earnings after tax at 3.60/ share
AFTER TAX REVENUE & EARNINGS (Sam & Nok sign at +-$1.00/ phone)
Cash at 330m or 7.6/share
Earnings per share for present Licenses .50/ share
Savings in Legal at .70/ share
Samsung Revenue at 78m
Nokia Revenue at 211
Samsung Earnings after tax at 1.09/ share
Nokia Earnings after tax at 2.94/ share
Pick a multiple. Will the market conditions have it under 20 or will market awareness and maybe even greed take it elsewhere?
JD, excluded any tables from TC report, as they turned into gibberish when copied as text
1st posting did not take for some reason but second went through.
Price Target $30-$36 Insider / Institutional Ownership 2%/60%
Company Description: InterDigital designs and develops technology content and systems
solutions for advanced digital wireless communications applications. The company licenses 2G
and 3G technology to wireless communications firms. Please see p. 8 for a Wireless Glossary.
• InterDigital delivered solid 3Q08 results. Revenue of $55.1 million and GAAP EPS of $0.20
compared to $56.5 million and EPS of $0.18 in 3Q07. InterDigital benefitted from a $2.7 million
offset to legal expenses in the quarter from a resolution to a 3G dispute in the United Kingdom with
Nokia (Nokia had filed suit against IDCC). Recurring patent license revenue was $51.6 million,
product revenue was $2.2 million (up from $0.8 million last year), and audits of licensees for past
underreporting of payments brought in $1.3 million. LG at 27% of revenue, Sharp at 16%, and NEC
at 13% were 10% or more customers. We believe Research in Motion and HTC were 5% or more
customers.
• Management also announced it is exploring options for its SlimChip modem and data card
business. Over the past few months, leading semiconductor manufacturers have announced
competing products, making it an uphill battle for InterDigital where scale is a necessity for profits.
We are in favor of a divestiture, as the business has required $25 million to $30 million of yearly
development expense, and has had only a limited revenue contribution.
• CEO Bill Merritt indicated high level discussions are ongoing between InterDigital and
Samsung regarding a 3G settlement. We believe this is par for the course, with a significant legal
ruling due over the next month. With Samsung also owing InterDigital approximately $180 million
for 2G sales, the parties appear to have trade offs at the negotiating table in order to achieve a deal.
• The International Trade Commission (ITC) is scheduled to rule on November 25, 2008 in
InterDigital’s patent infringement case against Samsung. Judge Paul Luckern will rule, absent
a settlement, whether Samsung infringes on five of InterDigital’s 3G patents. The five patents
encompass sixteen claims. Samsung has raised multiple defenses in the case including: 1)
InterDigital’s patents are invalid, 2) Samsung doesn’t infringe on the patents, and 3) Even if the
patents are valid, and Samsung infringes, Samsung has an implied license through InterDigital’s
declaration of the patents as essential through the European Telecommunications Standards Institute
(ETSI), and InterDigital has to offer the patents at fair, reasonable, and nondiscriminatory terms
(FRAND). We believe the latter defense is a case of Samsung throwing a claim against a wall and seeing what sticks, but the staff attorney in the case appears to side with Samsung on argument #3
However, we believe Judge Luckern’s decision will come down to validity and infringement. Why
get excited about InterDigital? If it wins, and signs Samsung and Nokia to a modest 3G royalty rate
of $0.50 per phone, we believe the firm’s earnings power could be $2.00 to $3.50 in 2009. See
Exhibits I and II for our calculations.
• Slowing worldwide mobile phone shipments and shrinking margins may lengthen negotiations
between InterDigital and the four main unlicensed manufacturers, Nokia, Samsung, Motorola,
and Sony Ericsson. Samsung and Nokia could be prodded by 3G infringement cases at the ITC, but
the leading mobile phone manufacturers are not rushing to take a 3G license with InterDigital as it
would impact already declining margins. Samsung and Nokia have been able to prolong court cases
and arbitration for years with appeal after appeal. Nokia and Samsung may be attempting to stall to
get InterDigital to accept pennies on the dollar, but IDCC’s $188 million war chest ($4.10/ share)
gives it flexibility to negotiate a favorable agreement.
• Absent a settlement, the ruling on November 25, 2008 looks like a bimodal outcome – either
really good for InterDigital or really bad. We believe these are the two most likely scenarios: 1)
Judge Luckern rules that Samsung infringes on InterDigital’s patents, and as a remedy, orders an
import ban on Samsung’s infringing 3G handsets into the U.S. or 2) Judge Luckern rules that either
InterDigital’s five patents are invalid, or that Samsung does not infringe on InterDigital’s patents.
Under scenario 1, we believe Samsung would likely sign a 3G license with InterDigital in the $0.50 to
$0.75 per phone area. This rate translates into approximately $300 million to $400 million for
InterDigital over the next five years. Scenario 2, however, is very pessimistic for InterDigital as
investors could question the worth of its patents, and in a worst-case scenario, existing licenses could
clamor for a discount in license renewal discussions. Under Scenario 2, we believe the share price
could fall to the $8-$12 range if InterDigital’s 3G patent portfolio becomes suspect. We believe this
is an extreme view, as the ITC case only entails five of InterDigital’s over 1,000 3G patents (not
including thousands of worldwide patent applications). However, if InterDigital can’t select five
patents that are valid, and infringed by Samsung, our view is that management will have a credibility
problem.
• If Judge Luckern rules in favor of InterDigital, but does not order a 3G handset ban on
Samsung, then InterDigital and Samsung likely restart their Delaware litigation. This outcome
has only a small probability, in our view, but we list it as a possibility as it preserves the status quo
(litigation) for the next twelve months.
• Samsung continues to appeal InterDigital’s attempt to collect its $180 million to $200 million 2G
arbitration award from September 2006. InterDigital and Samsung went to arbitration over a 2G
royalty dispute, and an arbitration panel unanimously ruled in InterDigital’s favor in September 2006
for $134 million, covering Samsung’s 2002-2006 sales. Arbitration is supposed to be binding, but
Samsung requested a second arbitration panel, which ruled in InterDigital’s favor. The panel ruled
that Samsung owes InterDigital $153 million (includes interest) for 2002-2005, and the panel may
rule on the 2006 amount in the coming months. We believe Samsung owes IDCC $180 million to
$200 million for 2002-2006 handset royalties. Although the award is outstanding, it could provide a
bargaining chip in 3G licensing discussions. Absent a resolution as part of a combined 2G/3G
settlement, Samsung could prolong IDCC collecting its 2G award until late 1Q09 or early 2Q09
through appeals in the United States courts.
• We believe InterDigital’s 3G patent infringement case against Samsung recently had final
arguments. Judge Luckern of the ITC completed an evidentiary hearing in mid-July, and has been
reviewing claims construction and post-hearing briefs. Judge Luckern is scheduled to rule November
25, 2008 whether Samsung infringes on IDCC’s five patents in the case. If he finds a violation, he
can also recommend remedies, one of which could be an import ban into the United States for
Samsung’s 3G phones that infringe on InterDigital’s patents. It appears that the staff attorney in the
case is siding with Samsung on some of the issues and InterDigital on others, but recommending against an import ban. The staff attorney’s opinion has merit, but Judge Luckern is a patent judge
with over 45 years experience as a patent examiner, patent lawyer and patent judge. With his wealth
of knowledge, we are confident Judge Luckern will rely heavily on his own experience (the staff
attorney was appointed to his position in early 2008) in formulating an opinion. Judge Luckern has a
technical background - beginning his work career as a chemist at Eastman Kodak, and also having
worked on Nokia/Qualcomm ITC cases - and is well qualified to decide the core patent validity and
patent infringement issues in the case.
• The ITC scheduled an evidentiary hearing for May 26-29, 2009, in InterDigital’s 3G patent
infringement complaint against Nokia. The case was put on hold in late March 2008 after Judge
Batts’ ruling that allowed Nokia to go to arbitration and injunct the ITC process. Judge Batts’ ruling
was overturned by the Second Circuit Court of Appeals in late July 2008, enabling the process at the
ITC to be restarted. When InterDigital filed the patent infringement complaint in August 2007, there
were four patents at issue. We expect a ruling by the presiding ITC judge in late 2009 or early 2010.
• Nokia and Qualcomm’s 3G and 4G settlement could provide a framework for InterDigital and
Nokia/Samsung to agree upon a 3G royalty rate. There are many confidential terms in the
Nokia/Qualcomm settlement, but it appears that the blended 3G royalty rate that Nokia is paying
Qualcomm is approximately 2%, or a little over $4 per phone at today’s average selling price per 3G
handset. We believe InterDigital is asking Nokia for $0.50 to $0.75 per phone, and Samsung for
$0.75 to $1.00 per phone. Although a modest rate, it would mean hundreds of millions of dollars of
royalty revenue to InterDigital over a five-year period, which is a common length of InterDigital
licenses. The licenses then renew for another five years, and so on. Please see Exhibits I and II for
the impact licensing agreements with Nokia, Samsung, and Sony Ericsson on IDCC’s financials.
• InterDigital will benefit from Apple’s 3G iPhone and Google’s new G1 phone. Apple is licensed
for 2G and 3G, although financial terms are not public. Additionally, InterDigital may receive a
royalty from its technology and licensing relationship with Infineon, a chip provider to Apple.
According to InterDigital’s management, it receives a royalty every time Infineon sells a 3G chip.
We estimate the royalty at $0.25 to $0.40 per chip. An important point to remember is that
InterDigital recognizes licensing revenue (whether handset or chip) with a one quarter lag, so
InterDigital would likely only recognize a nominal amount of revenue from Apple’s 3G shipments in
InterDigital’s 3Q08. The larger revenue contribution will be in 4Q08. Google’s G1 phone is
manufactured by High Tech Computer Corporation (HTC), an InterDigital licensee. Our
understanding is that InterDigital receives a royalty every time HTC manufactures a phone. We
expect Google’s handset shipments to significantly increase over the next two years.
• It is time for InterDigital’s management to deliver 3G licensing wins with major manufacturers.
After IDCC’s groundbreaking five-year combined 2G and 3G deal with LG Electronics in January
2006, management spoke of licensing momentum on conference calls during the remainder of 2006.
We believe the firm has had serious negotiations with Nokia, Samsung, and Sony Ericsson since the
LG Electronics agreement, but has been unable to agree on a licensing rate. This led InterDigital to
file a 3G patent infringement complaint against Samsung in March 2007; and one against Nokia in
August 2007. From legal filings, it appears Nokia and Samsung are trying the kitchen sink defense.
On one hand, they claim the patents are invalid. In the next argument, they claim even if the patents
are valid, that they don’t infringe on InterDigital’s patents. And finally, they claim they are willing to
license, but that IDCC hasn’t been willing to license under fair, reasonable, and not discriminatory
terms. We believe InterDigital is seeking $0.50 to $1.00 per handset from Nokia and Samsung (less
than 1% of the selling price of a handset). Once InterDigital finalized licensing deals with the majors,
an added bonus is that a large percentage of its legal fees will disappear – we estimate this would add
$0.50 or more to earnings.
• InterDigital’s cash position is a strong $4.10 per share, and could rise significantly over the next
six months if it collects its 2G award from Samsung and signs 3G licensing agreements with
major mobile phone manufacturers. The firm had $188 million of cash on its balance sheet at the end of 3Q08, and if IDCC collects its money owed from Samsung, the firm could have over $400
million in cash (or 40% of its market capitalization). InterDigital has repurchased 8.1 million shares
using its $100 million buyback plan launched in 4Q07. Although the firm could expand its share
repurchase plan once it collects its 2G monies owed from Samsung and/or finalizes 3G agreements
with Nokia and Samsung, we believe it is more likely the firm either starts a modest dividend in the
future, or uses its war chest for technology and patent acquisitions.
• We reiterate our Neutral rating. We are positive on InterDigital’s ability to sign 3G licensing
agreements with Samsung and Nokia, only uncertain as to the timing given Nokia and Samsung’s
willingness to use any and all legal means to stall over the past five years. 3G agreements with
industry heavyweights Nokia and Samsung could add hundreds of millions of dollars of licensing
revenue to InterDigital over a five year period, and lead us to project InterDigital’s earnings power at
$2.00 to $3.50 per share once it signs the leading manufacturers. We believe a reasonable price target
is 15x-18x the low end of the earnings, or $30-$36 per share. The target multiple may appear high
given that the forward multiple for the NASDAQ Composite is 13x, but a normalized NASDAQ
multiple is 15x-20x. Why don’t we have a Buy rating on the shares if our price target is $30-$36?
We don’t believe a traditional Buy rating is warranted for investors given what we believe is an
“either/or” outcome. However, for investors where options are suitable, we highlight several
strategies where one might profit from what we believe will be extreme volatility in the share price
once the ITC rules on November 25, 2009.
INVESTMENT THESIS
InterDigital is one of the leading wireless patent firms with approximately 3,000 2G and 3G patents, and
thousands of 3G and 4G patent applications worldwide. The firm has licensing agreements with
manufacturers such as LG Electronics, Apple, Research in Motion, Sharp, NEC, and Panasonic. It also
has a licensing and product relationship with chipset manufacturer, Infineon. One of the reasons to get
excited about InterDigital is that if/when it resolves its 3G royalty issues with Nokia and Samsung, we
estimate the firm’s earnings power, even at a modest $0.50 per phone for 3G products, could be $2.00 to
$3.50 per share in 2009. As 3G shipments increase their percentage of worldwide handset shipments in
the coming years, InterDigital’s earnings power at $0.50 per phone could rise to $5.00 per share, in our
view.
As industry-wide litigation has increased the past few years (see Nokia/Qualcomm, Sony
Ericsson/Samsung, and Qualcomm/Broadcom), it has become more challenging for InterDigital to secure
licensing agreements with top manufacturers. The firm signed a combined 2G/3G agreement with LG
Electronics in January 2006, a 2G/3G agreement with Apple in September 2007, and upgraded Research
in Motion to a 3G license in October 2007. However, securing 3G agreements with industry
heavyweights Nokia, Samsung, Sony Ericsson has proved daunting. InterDigital alleges that it: 1) Has
essential patents in 3G, 2) Has declared as such with ETSI, and 3) Believes these patents are incorporated
into the (International Telecommunications Union (ITU) 3G standards. Therefore, according to
InterDigital, all mobile phone manufacturers and data card manufactures that build 3G phones need a
license with InterDigital.
After Nokia and Samsung dragged their heels on 3G licensing negotiation, InterDigital filed 3G patent
infringement complaints at the International Trade Commission. If Nokia and Samsung are found to
infringe on InterDigital’s patents, one of the remedies the ITC can order is a ban on entry into the U.S. on
infringing phones. The key for InterDigital is to obtain an infringement ruling and ban on Nokia and
Samsung’s 3G handsets into the U.S. A ban would make Samsung and Nokia more willing to sign a 3G
licensing agreement with InterDigital, in our view. We estimate Samsung will ship approximately 25
million to 30 million 3G handsets (includes CDMA 2000) into the U.S. in 2008, and Nokia five million to
eight million. The number of 3G handsets each company ships should increase significantly in 2009 and
2010. While Nokia’s numbers are small given the firm’s worldwide totals, increasing its U.S. presence is a cornerstone of Nokia’s strategy. The firm knows it has fallen significantly behind Apple and Research
in Motion in the U.S., and needs to catch up in the important U.S. corporate market.
See Exhibit I and II for our estimates of InterDigital’s potential revenue and EPS if it signs licensing
agreements with the remaining top manufacturers. Note that if the firm signs 3G agreements with Nokia
and Samsung, it receives an added bonus – a large percentage of its litigation expense will disappear, and
add $0.50 or more to earnings, by our estimates.
WAYS TO INVEST/TRADE ON NOVEMBER 25, 2008 RULING
If there is a ruling on November 25, 2008, it could produce a large swing in InterDigital’s share price.
We estimate there is a 60%-70% chance Judge Luckern will rule that at least one of InterDigital’s patents
are valid and that Samsung infringes upon the patent. If an import ban on Samsung’s infringing 3G
handsets is also part of the ruling, Samsung will likely ink a 3G license with InterDigital given Samsung’s
large number of U.S. phone shipments. This could mean $300 million to $400 of million of revenue for
InterDigital (assuming a modest $0.50 to $0.75 royalty rate) over the next five years, and send
InterDigital’s share price $5-$10 higher, in our view.
An adverse ruling by Judge Luckern means that: 1) The patents are not valid, or 2) Samsung’s handsets
do not infringe on the patents, or 3) There is an implied license or FRAND argument that InterDigital is
not meeting. This could make investors question the value of InterDigital’s patents. In our view, this
could send InterDigital’s share price down to the $8-$12 range. The lower end of that range represents
InterDigital’s current cash balance plus the Samsung 2G award (not yet collected).
Here are our thoughts on handicapping the November 25, 2008 ruling:
60%-70% chance Judge Luckern rules that at least one of InterDigital’s patents are valid, and that
Samsung infringes. A 3G import ban on Samsung’s infringing handsets is part of the ruling.
25%-30% chance Judge Luckern rules that the patents are not valid, Samsung does not infringe,
or believes the implied license/FRAND argument, and lets Samsung off the hook at the ITC.
5%-10% chance that Judge Luckern tells the companies to resolve the royalty rate in a Delaware
court.
The dispersion in expected outcomes and potential volatility creates opportunity, in our view. Many of
these cases tend to settle at the last minute, almost on the proverbial “courthouse steps.” See the
Ericsson/Qualcomm case from 1999 and the recent Qualcomm/Nokia agreement. Below are some of the
ways we believe investors could attempt to profit from the ruling on November 25, 2008, which could
cause a $5-$10 price swing in InterDigital’s share price following the ruling:
1. Sometime between now and mid-November, an investor could buy a December straddle (buy a
call option and buy a put), attempting to profit on a potentially big swing in InterDigital’s share
price. With this strategy, it doesn’t matter which side prevails in the ruling or which way the
share price moves, only that the share price makes a significant move.
2. Purchase a December call option. This could be preferable compared to owning the shares
outright, as the most at risk is the call option premium.
3. Buy shares outright between now and mid-November, and hold the shares until November 23rd
or 24th. An investor would hope for a settlement before November 25th. This is a risky purchase
given: 1) Downside potential and 2) The fact that Samsung (along with Nokia) has always
attempted to prolong discussions rather than settle them.
We note that our rating on InterDigital is Neutral. Option trading my not be appropriate for all
investors, and investors must meet certain requirements before trading options.
Exhibit I: Nokia, Samsung, and Sony Ericsson Estimated Sales and Royalties to IDCC
JD, here is the report, excluding any tables, which turned into Gibberish when copied as text...
Price Target $30-$36 Insider / Institutional Ownership 2%/60%
Company Description: InterDigital designs and develops technology content and systems
solutions for advanced digital wireless communications applications. The company licenses 2G
and 3G technology to wireless communications firms. Please see p. 8 for a Wireless Glossary.
• InterDigital delivered solid 3Q08 results. Revenue of $55.1 million and GAAP EPS of $0.20
compared to $56.5 million and EPS of $0.18 in 3Q07. InterDigital benefitted from a $2.7 million
offset to legal expenses in the quarter from a resolution to a 3G dispute in the United Kingdom with
Nokia (Nokia had filed suit against IDCC). Recurring patent license revenue was $51.6 million,
product revenue was $2.2 million (up from $0.8 million last year), and audits of licensees for past
underreporting of payments brought in $1.3 million. LG at 27% of revenue, Sharp at 16%, and NEC
at 13% were 10% or more customers. We believe Research in Motion and HTC were 5% or more
customers.
• Management also announced it is exploring options for its SlimChip modem and data card
business. Over the past few months, leading semiconductor manufacturers have announced
competing products, making it an uphill battle for InterDigital where scale is a necessity for profits.
We are in favor of a divestiture, as the business has required $25 million to $30 million of yearly
development expense, and has had only a limited revenue contribution.
• CEO Bill Merritt indicated high level discussions are ongoing between InterDigital and
Samsung regarding a 3G settlement. We believe this is par for the course, with a significant legal
ruling due over the next month. With Samsung also owing InterDigital approximately $180 million
for 2G sales, the parties appear to have trade offs at the negotiating table in order to achieve a deal.
• The International Trade Commission (ITC) is scheduled to rule on November 25, 2008 in
InterDigital’s patent infringement case against Samsung. Judge Paul Luckern will rule, absent
a settlement, whether Samsung infringes on five of InterDigital’s 3G patents. The five patents
encompass sixteen claims. Samsung has raised multiple defenses in the case including: 1)
InterDigital’s patents are invalid, 2) Samsung doesn’t infringe on the patents, and 3) Even if the
patents are valid, and Samsung infringes, Samsung has an implied license through InterDigital’s
declaration of the patents as essential through the European Telecommunications Standards Institute
(ETSI), and InterDigital has to offer the patents at fair, reasonable, and nondiscriminatory terms
(FRAND). We believe the latter defense is a case of Samsung throwing a claim against a wall and seeing what sticks, but the staff attorney in the case appears to side with Samsung on argument #3
However, we believe Judge Luckern’s decision will come down to validity and infringement. Why
get excited about InterDigital? If it wins, and signs Samsung and Nokia to a modest 3G royalty rate
of $0.50 per phone, we believe the firm’s earnings power could be $2.00 to $3.50 in 2009. See
Exhibits I and II for our calculations.
• Slowing worldwide mobile phone shipments and shrinking margins may lengthen negotiations
between InterDigital and the four main unlicensed manufacturers, Nokia, Samsung, Motorola,
and Sony Ericsson. Samsung and Nokia could be prodded by 3G infringement cases at the ITC, but
the leading mobile phone manufacturers are not rushing to take a 3G license with InterDigital as it
would impact already declining margins. Samsung and Nokia have been able to prolong court cases
and arbitration for years with appeal after appeal. Nokia and Samsung may be attempting to stall to
get InterDigital to accept pennies on the dollar, but IDCC’s $188 million war chest ($4.10/ share)
gives it flexibility to negotiate a favorable agreement.
• Absent a settlement, the ruling on November 25, 2008 looks like a bimodal outcome – either
really good for InterDigital or really bad. We believe these are the two most likely scenarios: 1)
Judge Luckern rules that Samsung infringes on InterDigital’s patents, and as a remedy, orders an
import ban on Samsung’s infringing 3G handsets into the U.S. or 2) Judge Luckern rules that either
InterDigital’s five patents are invalid, or that Samsung does not infringe on InterDigital’s patents.
Under scenario 1, we believe Samsung would likely sign a 3G license with InterDigital in the $0.50 to
$0.75 per phone area. This rate translates into approximately $300 million to $400 million for
InterDigital over the next five years. Scenario 2, however, is very pessimistic for InterDigital as
investors could question the worth of its patents, and in a worst-case scenario, existing licenses could
clamor for a discount in license renewal discussions. Under Scenario 2, we believe the share price
could fall to the $8-$12 range if InterDigital’s 3G patent portfolio becomes suspect. We believe this
is an extreme view, as the ITC case only entails five of InterDigital’s over 1,000 3G patents (not
including thousands of worldwide patent applications). However, if InterDigital can’t select five
patents that are valid, and infringed by Samsung, our view is that management will have a credibility
problem.
• If Judge Luckern rules in favor of InterDigital, but does not order a 3G handset ban on
Samsung, then InterDigital and Samsung likely restart their Delaware litigation. This outcome
has only a small probability, in our view, but we list it as a possibility as it preserves the status quo
(litigation) for the next twelve months.
• Samsung continues to appeal InterDigital’s attempt to collect its $180 million to $200 million 2G
arbitration award from September 2006. InterDigital and Samsung went to arbitration over a 2G
royalty dispute, and an arbitration panel unanimously ruled in InterDigital’s favor in September 2006
for $134 million, covering Samsung’s 2002-2006 sales. Arbitration is supposed to be binding, but
Samsung requested a second arbitration panel, which ruled in InterDigital’s favor. The panel ruled
that Samsung owes InterDigital $153 million (includes interest) for 2002-2005, and the panel may
rule on the 2006 amount in the coming months. We believe Samsung owes IDCC $180 million to
$200 million for 2002-2006 handset royalties. Although the award is outstanding, it could provide a
bargaining chip in 3G licensing discussions. Absent a resolution as part of a combined 2G/3G
settlement, Samsung could prolong IDCC collecting its 2G award until late 1Q09 or early 2Q09
through appeals in the United States courts.
• We believe InterDigital’s 3G patent infringement case against Samsung recently had final
arguments. Judge Luckern of the ITC completed an evidentiary hearing in mid-July, and has been
reviewing claims construction and post-hearing briefs. Judge Luckern is scheduled to rule November
25, 2008 whether Samsung infringes on IDCC’s five patents in the case. If he finds a violation, he
can also recommend remedies, one of which could be an import ban into the United States for
Samsung’s 3G phones that infringe on InterDigital’s patents. It appears that the staff attorney in the
case is siding with Samsung on some of the issues and InterDigital on others, but recommending against an import ban. The staff attorney’s opinion has merit, but Judge Luckern is a patent judge
with over 45 years experience as a patent examiner, patent lawyer and patent judge. With his wealth
of knowledge, we are confident Judge Luckern will rely heavily on his own experience (the staff
attorney was appointed to his position in early 2008) in formulating an opinion. Judge Luckern has a
technical background - beginning his work career as a chemist at Eastman Kodak, and also having
worked on Nokia/Qualcomm ITC cases - and is well qualified to decide the core patent validity and
patent infringement issues in the case.
• The ITC scheduled an evidentiary hearing for May 26-29, 2009, in InterDigital’s 3G patent
infringement complaint against Nokia. The case was put on hold in late March 2008 after Judge
Batts’ ruling that allowed Nokia to go to arbitration and injunct the ITC process. Judge Batts’ ruling
was overturned by the Second Circuit Court of Appeals in late July 2008, enabling the process at the
ITC to be restarted. When InterDigital filed the patent infringement complaint in August 2007, there
were four patents at issue. We expect a ruling by the presiding ITC judge in late 2009 or early 2010.
• Nokia and Qualcomm’s 3G and 4G settlement could provide a framework for InterDigital and
Nokia/Samsung to agree upon a 3G royalty rate. There are many confidential terms in the
Nokia/Qualcomm settlement, but it appears that the blended 3G royalty rate that Nokia is paying
Qualcomm is approximately 2%, or a little over $4 per phone at today’s average selling price per 3G
handset. We believe InterDigital is asking Nokia for $0.50 to $0.75 per phone, and Samsung for
$0.75 to $1.00 per phone. Although a modest rate, it would mean hundreds of millions of dollars of
royalty revenue to InterDigital over a five-year period, which is a common length of InterDigital
licenses. The licenses then renew for another five years, and so on. Please see Exhibits I and II for
the impact licensing agreements with Nokia, Samsung, and Sony Ericsson on IDCC’s financials.
• InterDigital will benefit from Apple’s 3G iPhone and Google’s new G1 phone. Apple is licensed
for 2G and 3G, although financial terms are not public. Additionally, InterDigital may receive a
royalty from its technology and licensing relationship with Infineon, a chip provider to Apple.
According to InterDigital’s management, it receives a royalty every time Infineon sells a 3G chip.
We estimate the royalty at $0.25 to $0.40 per chip. An important point to remember is that
InterDigital recognizes licensing revenue (whether handset or chip) with a one quarter lag, so
InterDigital would likely only recognize a nominal amount of revenue from Apple’s 3G shipments in
InterDigital’s 3Q08. The larger revenue contribution will be in 4Q08. Google’s G1 phone is
manufactured by High Tech Computer Corporation (HTC), an InterDigital licensee. Our
understanding is that InterDigital receives a royalty every time HTC manufactures a phone. We
expect Google’s handset shipments to significantly increase over the next two years.
• It is time for InterDigital’s management to deliver 3G licensing wins with major manufacturers.
After IDCC’s groundbreaking five-year combined 2G and 3G deal with LG Electronics in January
2006, management spoke of licensing momentum on conference calls during the remainder of 2006.
We believe the firm has had serious negotiations with Nokia, Samsung, and Sony Ericsson since the
LG Electronics agreement, but has been unable to agree on a licensing rate. This led InterDigital to
file a 3G patent infringement complaint against Samsung in March 2007; and one against Nokia in
August 2007. From legal filings, it appears Nokia and Samsung are trying the kitchen sink defense.
On one hand, they claim the patents are invalid. In the next argument, they claim even if the patents
are valid, that they don’t infringe on InterDigital’s patents. And finally, they claim they are willing to
license, but that IDCC hasn’t been willing to license under fair, reasonable, and not discriminatory
terms. We believe InterDigital is seeking $0.50 to $1.00 per handset from Nokia and Samsung (less
than 1% of the selling price of a handset). Once InterDigital finalized licensing deals with the majors,
an added bonus is that a large percentage of its legal fees will disappear – we estimate this would add
$0.50 or more to earnings.
• InterDigital’s cash position is a strong $4.10 per share, and could rise significantly over the next
six months if it collects its 2G award from Samsung and signs 3G licensing agreements with
major mobile phone manufacturers. The firm had $188 million of cash on its balance sheet at the end of 3Q08, and if IDCC collects its money owed from Samsung, the firm could have over $400
million in cash (or 40% of its market capitalization). InterDigital has repurchased 8.1 million shares
using its $100 million buyback plan launched in 4Q07. Although the firm could expand its share
repurchase plan once it collects its 2G monies owed from Samsung and/or finalizes 3G agreements
with Nokia and Samsung, we believe it is more likely the firm either starts a modest dividend in the
future, or uses its war chest for technology and patent acquisitions.
• We reiterate our Neutral rating. We are positive on InterDigital’s ability to sign 3G licensing
agreements with Samsung and Nokia, only uncertain as to the timing given Nokia and Samsung’s
willingness to use any and all legal means to stall over the past five years. 3G agreements with
industry heavyweights Nokia and Samsung could add hundreds of millions of dollars of licensing
revenue to InterDigital over a five year period, and lead us to project InterDigital’s earnings power at
$2.00 to $3.50 per share once it signs the leading manufacturers. We believe a reasonable price target
is 15x-18x the low end of the earnings, or $30-$36 per share. The target multiple may appear high
given that the forward multiple for the NASDAQ Composite is 13x, but a normalized NASDAQ
multiple is 15x-20x. Why don’t we have a Buy rating on the shares if our price target is $30-$36?
We don’t believe a traditional Buy rating is warranted for investors given what we believe is an
“either/or” outcome. However, for investors where options are suitable, we highlight several
strategies where one might profit from what we believe will be extreme volatility in the share price
once the ITC rules on November 25, 2009.
INVESTMENT THESIS
InterDigital is one of the leading wireless patent firms with approximately 3,000 2G and 3G patents, and
thousands of 3G and 4G patent applications worldwide. The firm has licensing agreements with
manufacturers such as LG Electronics, Apple, Research in Motion, Sharp, NEC, and Panasonic. It also
has a licensing and product relationship with chipset manufacturer, Infineon. One of the reasons to get
excited about InterDigital is that if/when it resolves its 3G royalty issues with Nokia and Samsung, we
estimate the firm’s earnings power, even at a modest $0.50 per phone for 3G products, could be $2.00 to
$3.50 per share in 2009. As 3G shipments increase their percentage of worldwide handset shipments in
the coming years, InterDigital’s earnings power at $0.50 per phone could rise to $5.00 per share, in our
view.
As industry-wide litigation has increased the past few years (see Nokia/Qualcomm, Sony
Ericsson/Samsung, and Qualcomm/Broadcom), it has become more challenging for InterDigital to secure
licensing agreements with top manufacturers. The firm signed a combined 2G/3G agreement with LG
Electronics in January 2006, a 2G/3G agreement with Apple in September 2007, and upgraded Research
in Motion to a 3G license in October 2007. However, securing 3G agreements with industry
heavyweights Nokia, Samsung, Sony Ericsson has proved daunting. InterDigital alleges that it: 1) Has
essential patents in 3G, 2) Has declared as such with ETSI, and 3) Believes these patents are incorporated
into the (International Telecommunications Union (ITU) 3G standards. Therefore, according to
InterDigital, all mobile phone manufacturers and data card manufactures that build 3G phones need a
license with InterDigital.
After Nokia and Samsung dragged their heels on 3G licensing negotiation, InterDigital filed 3G patent
infringement complaints at the International Trade Commission. If Nokia and Samsung are found to
infringe on InterDigital’s patents, one of the remedies the ITC can order is a ban on entry into the U.S. on
infringing phones. The key for InterDigital is to obtain an infringement ruling and ban on Nokia and
Samsung’s 3G handsets into the U.S. A ban would make Samsung and Nokia more willing to sign a 3G
licensing agreement with InterDigital, in our view. We estimate Samsung will ship approximately 25
million to 30 million 3G handsets (includes CDMA 2000) into the U.S. in 2008, and Nokia five million to
eight million. The number of 3G handsets each company ships should increase significantly in 2009 and
2010. While Nokia’s numbers are small given the firm’s worldwide totals, increasing its U.S. presence is a cornerstone of Nokia’s strategy. The firm knows it has fallen significantly behind Apple and Research
in Motion in the U.S., and needs to catch up in the important U.S. corporate market.
See Exhibit I and II for our estimates of InterDigital’s potential revenue and EPS if it signs licensing
agreements with the remaining top manufacturers. Note that if the firm signs 3G agreements with Nokia
and Samsung, it receives an added bonus – a large percentage of its litigation expense will disappear, and
add $0.50 or more to earnings, by our estimates.
WAYS TO INVEST/TRADE ON NOVEMBER 25, 2008 RULING
If there is a ruling on November 25, 2008, it could produce a large swing in InterDigital’s share price.
We estimate there is a 60%-70% chance Judge Luckern will rule that at least one of InterDigital’s patents
are valid and that Samsung infringes upon the patent. If an import ban on Samsung’s infringing 3G
handsets is also part of the ruling, Samsung will likely ink a 3G license with InterDigital given Samsung’s
large number of U.S. phone shipments. This could mean $300 million to $400 of million of revenue for
InterDigital (assuming a modest $0.50 to $0.75 royalty rate) over the next five years, and send
InterDigital’s share price $5-$10 higher, in our view.
An adverse ruling by Judge Luckern means that: 1) The patents are not valid, or 2) Samsung’s handsets
do not infringe on the patents, or 3) There is an implied license or FRAND argument that InterDigital is
not meeting. This could make investors question the value of InterDigital’s patents. In our view, this
could send InterDigital’s share price down to the $8-$12 range. The lower end of that range represents
InterDigital’s current cash balance plus the Samsung 2G award (not yet collected).
Here are our thoughts on handicapping the November 25, 2008 ruling:
60%-70% chance Judge Luckern rules that at least one of InterDigital’s patents are valid, and that
Samsung infringes. A 3G import ban on Samsung’s infringing handsets is part of the ruling.
25%-30% chance Judge Luckern rules that the patents are not valid, Samsung does not infringe,
or believes the implied license/FRAND argument, and lets Samsung off the hook at the ITC.
5%-10% chance that Judge Luckern tells the companies to resolve the royalty rate in a Delaware
court.
The dispersion in expected outcomes and potential volatility creates opportunity, in our view. Many of
these cases tend to settle at the last minute, almost on the proverbial “courthouse steps.” See the
Ericsson/Qualcomm case from 1999 and the recent Qualcomm/Nokia agreement. Below are some of the
ways we believe investors could attempt to profit from the ruling on November 25, 2008, which could
cause a $5-$10 price swing in InterDigital’s share price following the ruling:
1. Sometime between now and mid-November, an investor could buy a December straddle (buy a
call option and buy a put), attempting to profit on a potentially big swing in InterDigital’s share
price. With this strategy, it doesn’t matter which side prevails in the ruling or which way the
share price moves, only that the share price makes a significant move.
2. Purchase a December call option. This could be preferable compared to owning the shares
outright, as the most at risk is the call option premium.
3. Buy shares outright between now and mid-November, and hold the shares until November 23rd
or 24th. An investor would hope for a settlement before November 25th. This is a risky purchase
given: 1) Downside potential and 2) The fact that Samsung (along with Nokia) has always
attempted to prolong discussions rather than settle them.
We note that our rating on InterDigital is Neutral. Option trading my not be appropriate for all
investors, and investors must meet certain requirements before trading options.
Exhibit I: Nokia, Samsung, and Sony Ericsson Estimated Sales and Royalties to IDCC
Nokia Pay as you go model\
Please do not forget, there must be many in the bleachers (such as I) who significantly benefit from those here who regularly and unselfishly provided meaningful information regarding our investment. The Legal Eagles’ opinions carry additional weight and are dearly needed; as such opinions are inherent to the legal fronts we presently fight. To boot, we are treated with the thoughts of those who are so articulately gifted, of whom my family and friends know well. Undoubtedly, you know who you are.
Otherwise in silence, in an attempt to maintain this board’s discussion uncluttered, I absolutely respect and sheer you guys on from the bleachers daily. I could not have decided to stay in this investment for 9 years without your commentary. As you, this bleacher dueler hopes the near future brings licenses from Nokia, Samsung and others. If the wins come (“soon”), my first travels find us in Paris in celebration.
OT- Why are we not driving on sun light?
HOME MADE SOLAR CAR
squingeqbob, the best data-base I know goes by the name "olddog967".
Vijay's 3G iPhone predictions (June 5)
http://wirelessanalyst.blogspot.com/2008/06/3g-iphone-predictions-recap.html
Thursday, June 5, 2008
We are less than a week off from the Apple Worldwide Developer's Conference 2008 (WWDC) in which the 3G iPhone is expected to make its debut. I have, over the past year, covered the 3G iPhone in great detail. As we head to the WWDC, I thought it will be nice to compile my iPhone predictions about some component suppliers. Take them for what they are - just predictions!
3G Baseband: Infineon will be at the heart of the iPhone. The Infineon 3G chip will have a software stack that is jointly developed with InterDigital. The King of Prussia-based InterDigital is also likely to have a good portion of the baseband IP if my guess is right. I am basing this last speculation on the performance of the IFX chipsets in recently conducted tests.Essentially, InterDigital will earn a per-chip royalty for the software stack and possibly for the baseband IP. For more details on the 3G baseband supplier analysis, I will direct you to my article here.
Application Processor: Samsung will perhaps continue to own this part. Marvell has an outside chance.
WLAN: For platform stability issues, I will bet on Marvell grabbing this socket again. Broadcom may spring a surprise with its WLAN-BT-FM integrated solution.
Bluetooth: If WLAN belongs to Marvell, CSR, which is in the current iPhone, will likely own the Bluetooth socket again.
GPS: The next generation will have GPS and it will likely belong to Broadcom. This was recently ratified by a GigaOm report.
Touchscreen: Broadcom
I cannot hypothesise on other components. But if I were to guess, I will bet on Apple retaining most existing suppliers. While I have been talking about these component suppliers for around a year now, some of these predictions may appear matter-of-fact to readers today. In any case, now that I have put it all in a list, let us see what my hit-rate is!
Loop, thanks for thoughts EOM
Loop, if I may...regarding the potential drawback, in your referenced post, of which you stated...
"The only drawback is the real possibility that the UK judge will not hear the case at all because at this point IDCC does not believe it needs a license from Nok and I have not heard Nok say IDCC must license with them either."
Aware of your post and after reading the article in link below, I muse...would it not be contradictory (as in precedence) to the earlier UK case, if the judge did not hear the new case? Other than an "improper" decision, am I missing something?
http://www.twobirds.com/English/publications/articles/Nokia_v_InterDigital.cfm
Excerpt from above link:
"The ultimate declaration might be qualified to indicate which options were covered and which were not but this would not be a theoretical exercise. It would tell everybody exactly where they stand and which options are covered and not covered by the patents.
The Court of Appeal’s conclusion was not affected by the fact that Nokia had a licence under the patents. InterDigital had argued on that basis that there was no real dispute between the parties but the Court of Appeal was satisfied that that was not the case. The essentiality or its degree affected the value of a patent. The opinion of the Court as to “essential” or not was not merely an advisory opinion. It was a real, live, commercial question between the parties.
Appreciate your opinions as many others have expressed."
Samsung Selects Infineon HSDPA Platform for HEDGE Mobile Phone Family
Neubiberg, Germany – April 23, 2008 – Infineon Technologies AG (FSE/NYSE: IFX) today announced that Samsung Electronics, Inc., Seoul, Korea, has chosen Infineon’s HSDPA Platform XMM™6080 for their new family of HEDGE (HSDPA/EDGE) mobile handsets. Samsung is introducing a comprehensive family using the Infineon XMM 6080 platform. The platform includes the HSDPA/EDGE baseband, power management, single chip 3.5G RF transceiver and is complemented by Infineon’s protocol stack for HEDGE phones.
This state of the art solution enables customers to significantly reduce their component count, footprint, complexity and cost of designs. The launch also underlines the global maturity of Infineon’s in-house protocol stack. The XMM 6080 platform will enable Samsung to introduce a wide range of new HEDGE (HSDPA/EDGE) phones reusing the proven Infineon core architecture.
Infineon has already started volume shipments of its platform. The Samsung HEDGE phones with the XMM 6080 are expected to be available in the second quarter of calendar year 2008.
Further information on Infineon’s product portfolio for communication solutions is available at http://www.infineon.com/wireless
http://www.presseagentur.com/infineon/detail.php?pr_id=1740&lang=en
PRODUCT BRIEF
X-GOLDTM608/XMMTM6080
X-GOLDTM608 - the Heart of Infineon’s
7.2Mbit/s HSDPA Platform XMMTM6080
http://www.infineon.com/dgdl/X-GOLD608_XMM6080.pdf?folderId=db3a304312fcb1bc0113000c158f0004&fileId=db3a30431936bc4b011957c66fee3850
Goodbuddy, they're not all patent holders. Here's what the site says...
The Forum now has over 300 members from more than 30 countries covering all sectors of the value chain, namely standardization agents, operators, vendors, content providers, financial and investment organizations, research institutions, etc.
http://www.tdscdma-forum.org/en/aboutus/index.asp#6
OT: While we wait, Grandma goes to court...
Lawyers should never ask a Mississippi grandma a question if they aren't prepared for the answer.
In a trial, a Southern small-town prosecuting attorney called his first witness, a grandmotherly, elderly woman to the stand. He approached her and asked, 'Mrs. Jones, do you know me?'
She responded, 'Why, yes, I do know you, Mr. Williams. I've known you since you were a boy, and frankly, you've been a big disappointment to me. You lie, you cheat on your wife, and you manipulate people and talk about them behind their backs. You think you're a big shot when you haven't the brains to realize you'll never amount to anything more than a two-bit paper pusher. Yes, I know you.'
The lawyer was stunned. Not knowing what else to do, he pointed across the room and asked, 'Mrs. Jones, do you know the defense attorney?'
She again replied, ' Why yes, I do. I've known Mr. Bradley since he was a youngster, too. He's lazy, bigoted, and he has a drinking problem. He can't build a normal relationship with anyone, and his law practice is one of the worst in the entire state. Not to mention he cheated on his wife with three different women. One of them was your wife. Yes, I know him.'
The defense attorney nearly died.
The judge asked both counselors to approach the bench and, in a very quiet voice, said, 'If either of you idiots asks her if she knows me, I'll send you both to the electric chair.'
http://kalimna.blogspot.com/2008/02/grandma-goes-to-court.html
sinnet14, the 8k says..."towards resolution of all disputes".
"All" is as comprehensive and absolute as it gets in contract speak, while "disputes" includes "resolution of all" Aternative Dispute Resolutions such as arbitration and any "contingent upon"(s).
From 8k...
1. Nokia Corporation and InterDigital are in settlement discussions and have made substantial progress towards resolution of all disputes between them.
Has the ink dried? I sure hope so.
SPOTLIGHT: InterDigital banks on patent wins
March 6, 2008
Tags RIM Apple Nokia samsung iPhone ITC Interdigital
Tools Email Print Comment Contact Author
Apple has already inked a deal with InterDigital for licensing its technology on the iPhone, and Research In Motion has too. Nokia and Samsung are holding out, however, and it's up to the ITC to decide. If InterDigital wins, then those licensing deals could double its revenue. Article (WSJ sub. req.)
http://www.fiercewireless.com/story/spotlight-interdigital-banks-on-patent-wins/2008-03-06
Nagarajan on Interdigital: March 1 and past articles
http://wirelessanalyst.blogspot.com/search/label/Interdigital
Excerpt
So, while the market panics, there will be a few who will collect shares for cheap. They know that when this money comes, the same market will scamper to lay their hands on this stock. That is when $17.50 will look real cheap. But for those who want to make some quicker fortunes from this stock, ask William Merritt and his team to BE CONSISTENTLY CONSISTENT.
Interdigital - Be Consistent
Saturday, March 1, 2008
Interdigital announced its Q4 2007 and its annual financial results yesterday. Its net loss was reported at $1.98 million or $0.04 per share compared to net income of $20.26 million or $0.37 per share in Q4 2006. Pro Forma net income for the quarter was $3.09 million, or $0.06 per share. Below analyst estimates, this announcement was greeted with a 6% share price fall.
I am not completely surprised by this turn of events just a few days after I valued it at $75 on Sramana Mitra's site. The reason: Lack of consistency. Or like my friend would say, they are "consistently inconsistent."
A reader asked me why the Street did not think the same way I did about the company despite its great story. And one of the key reasons I stated was its inconsistency. You can read the rest of my reply here.
All said and done, I reiterate that the royalties are there to be collected. So, the money will come although not completely as a recurring revenue. So, while the market panics, there will be a few who will collect shares for cheap. They know that when this money comes, the same market will scamper to lay their hands on this stock. That is when $17.50 will look real cheap. But for those who want to make some quicker fortunes from this stock, ask William Merritt and his team to BE CONSISTENTLY CONSISTENT.
Read More......
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Labels: Interdigital, valuation
Interdigital - convincing the Street
Not long ago, after reading my valuation analysis of Interdigital, a reader asked me why the Street did not see it the way I did on Interdigital. Here was my reply.
I think there are at least 3 reasons I can see-
1. Licensing Vs settlements: Wall Street likes consistency and predictability (if there is such a thing when it comes to stock). While IDCC has sufficient IP to demand money from the cellular world, it has predominantly come from legal settlements and not from licensing deals. The uncertainties associated with the legal proceedings are certainly a negative. On the other hand, if it starts to see a steady flow of revenue through pre-inked licenses, things would be a lot different. This will also boost the confidence that the Street has on the company's future.
2. Industry perceptions: The Street's perception will be governed to a certain extent on what the industry's perception of IDCC is. The truth of the matter is that IDCC has so far been seen as an IP shark waiting for the products to come out before sending them a legal notice. Given the past, they see IDCC as more to do with the legal team than the engineers and scientists who continually churn out those patents. So, many leading players in the industry perhaps have a vested interest in making sure that IDCC is low-profile.
3. Need for out-of-the-box thinking: While I mean no disrespect, I do think that there is a tendency to go with the 'masses' in terms of predictions. Most analysts, in my opinion, tend to play it safe and you don't see too much variation in either their perception and/or target prices. This reduces their risks and liability. Also, most analysts are removed from industry events and happenings and tend to employ conventional processses with historic and peer data to value companies. This is likely to yield a poorer 'guess-timate' of any company's value.
My analysis and valuation draws heavily from my close involvment with the 3GPP and other mobile standards. I have also interacted with friends from various companies and so have a sense of the relative IP positions and the geo-political alignment of the industry. Hence my perceptions tend to be a little more educated from an industry perspective. Also, I tend not to look at other reports to have a pre-conceived notion of what its value should be.
In summary, my thesis is that if IDCC has to work the system, it needs to -
1. get licenses with top handset vendors to reduce legal risks.
2. work towards changing industry perception. (I think it is already working towards this through, for example, its chip business and standards participation) These should push its stock price closer to its 'true' value.
We have to wait though, to see how exactly the company plans and executes its moves to convince the street.
Read More......
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Labels: 3GPP, Interdigital, valuation
boxsterS, share your pain for sure...However, the time to know when to place your bets is now while nothing else matters.
With March 24 just looming, I’m ready to be thoroughly entertained by the legal system at the ITC these next 8 months, with a bottle of Johnny Walker by my side just in case it goes the other way.
With a big win there, will the past matter? Absolutely not!
loophole73
http://investorshub.advfn.com/boards/read_msg.asp?message_id=27297943
whizzeresq
http://investorshub.advfn.com/boards/read_msg.asp?message_id=27263684
Gohrs, thanks for keeping us objective EOM
Samsung’s dates for appeal of award for 2G
Here's what I have from Tom Carpenter's latest report...
13-Mar: Samsung’s brief
14-Apr: IDCC’s response to Samsung’s brief
Mid-Jun: Final Ruling on Sansung's appeal (Tom Carpenter guessed about two months after 14-Apr)
Eric & Data, thanks
Anyone, of total handsets below, what percent is 3G only?
Total vendor worlwide handsets shipped in 2007...
Nokia 437.1 38.2%
Samsung 161.1 14.1%
Motorola 159.0 13.9%
Sony Ericsson 103.4 9.0%
LG Electronics 80.5 7.0%
Others 202.9 17.7%
Total 1144.1 100.0%
Vendor shipments are branded shipments and exclude OEM sales for all vendors.
http://www.3g.co.uk/PR/Jan2008/5676.htm
Thanks in advance
Loop & Revlis RE 2007 handset sales
here's another report that was posted recently (virtualy the same recap)...
http://www.3g.co.uk/PR/Jan2008/5676.htm
Top Five Mobile Phone Manufacturers
Do you receive our FREE 3G Newsletter ? If not click here
28th January , 2008
US : The worldwide mobile phone market passed a new milestone in shipments by recording over 300 million devices shipped during the fourth quarter, while experiencing slower year-over-year growth for 2007.
According to IDC’s Worldwide Mobile Phone Tracker, the 334.0 million handsets shipped during the holiday quarter was a new record for the industry, and was up 15.3% over last quarter.
For the entire year, total shipments reached 1,144.1 million units in 2007 with 12.4% overall growth. Nokia once again led vendors in shipments throughout the year, although some shakeup in the vendor rankings did occur. Samsung, which had been the number three vendor in the industry, surpassed Motorola during 2007 to capture the number two spot.
"Give credit to Samsung for taking the number two position worldwide from Motorola," says Ramon Llamas, research analyst with IDC's Mobile Devices Technology and Trends team. "For the past few years, Samsung’s growth kept pace with the market, but in 2007 the company beat the market almost by a factor of four. Samsung capitalized on replacement handset opportunities in the United States and Europe with a steady stream of mid-range and high-end devices while Motorola spent much of the year addressing inventory challenges across EMEA and Asia. Now that Motorola is implementing a new handset strategy, it will be interesting to watch the hotly contested number two position in 2008."
“Over the last three years, growth in the industry during the holiday quarter has fluctuated from 18.0% to 30.0%, and this past quarter we saw it drop to 11.6%,” said Ryan Reith, senior research analyst with IDC’s Worldwide Mobile Phone Tracker. “The expectation that the market would maintain the level of growth it saw over the last three years was unrealistic. We expect growth to be in the single digits throughout 2008, and most likely for years to follow.”
Top Five Mobile Phone Vendors
Nokia shipped more units in the fourth quarter than the next three vendors' shipment volumes combined. This, Nokia executives pointed out, was the result of its streamlined operations, which produced on average nearly 1.5 million units each day during the quarter. This number could have been even higher if the company did not have to deal with component shortages during production. Regardless, it still marks a significant accomplishment. Nokia's volumes were primarily driven by entry level products from its 1100 and 1200 device families, but its biggest revenue and profit generators came from its premium Nseries devices.
Samsung achieved several noteworthy accomplishments to end 2007: It took the No. 2 position worldwide for the year, posted its third consecutive quarter as the No. 2 vendor worldwide, and recorded its sixth consecutive quarter of shipment growth. In the process, Samsung realized double-digit profit margins during the quarter, resulting from an emphasis on its premium Ultra Edition phones and converged mobile devices. Looking ahead to the first quarter of 2008, the company plans to top its 46.3 million shipment volume while maintaining profit margins.
Motorola spent another quarter addressing its challenges, the most significant being a slowing demand for Motorola's products. CEO Greg Brown pointed out that the company had missed out on significant growth areas, most notably in 3G, China, and emerging markets, and that gaps in Motorola's current product portfolio had to be addressed. Recent announcements of its ROKR E8, Z10, and W series reflect Motorola's attempts to revive its handset business, but recovery is expected to continue into 2009.
Sony Ericsson broke through the thirty million unit mark for the first time in its history. As in previous quarters, EMEA represented the bulk of the company's shipments, but it also improved its presence in North America, Latin America, and Asia Pacific. Even with greater attention and resources going towards emerging markets, Sony Ericsson still recorded the highest ASP among the leading vendors. Key devices for the quarter included the K550, W200, W300 and the W580.
LG Electronics took another step towards breaking the 25 million mark, and with the success of premium devices in developed markets and cost effectiveness, the company also realized slight operating margin improvement. Key to its success were several models released during the quarter, including the Voyager and Venus in the United States, and the Viewty in Europe. Despite its positive results during the quarter, LG saw the distance between itself and Sony Ericsson grow to more than seven million units, reversing the progress it had made in previous quarters.
Top Five Mobile Phone Vendors, Worldwide Q3 2007 Results
Vendor 4Q07 Unit Shipments 4Q07 Market Share 4Q06 Unit Shipments 4Q06 Market Share 4Q07/4Q06 Growth
Nokia 133.5 40.0% 105.5 35.2% 26.5%
Samsung 46.3 13.9% 32.9 11.0% 40.7%
Motorola 40.9 12.2% 65.7 22.0% -37.8%
Sony Ericsson 30.8 9.2% 26.0 8.7% 18.5%
LG Electronics 23.7 7.1% 17.7 5.9% 33.6%
Others 58.8 17.6% 51.5 17.2% 14.2%
Total 334.0 100.0% 299.3 100.0% 11.6%
Top Five Mobile Phone Vendors, Worldwide Full Year 2007 Results
Vendor 2007 Unit Shipments 2007 Market Share 2006 Unit Shipments 2006 Market Share 2007/2006 Growth
Nokia 437.1 38.2% 347.5 34.2% 25.8%
Samsung 161.1 14.1% 113.7 11.2% 41.7%
Motorola 159.0 13.9% 217.4 21.4% -26.9%
Sony Ericsson 103.4 9.0% 74.7 7.3% 38.4%
LG Electronics 80.5 7.0% 63.5 6.2% 26.8%
Others 202.9 17.7% 200.6 19.7% 1.1%
Total 1144.1 100.0% 1017.4 100.0% 12.4%
Note: Vendor shipments are branded shipments and exclude OEM sales for all vendors.
Mobile Phones – These small, battery-powered, voice-centric devices utilize operator-provided cellular/PCS air interfaces for voice communication. They are designed primarily, in both form factor and feature set, for a compelling mobile telephony experience, but may also include text-messaging capability. Mobile phones may include a headset jack for hands-free operation as well as a variety of features, such as personal information management, multimedia, games, or office applications. Mobile phones exist at all points along the form factor, price point, and feature set continua. Mobile phones that combine voice communications capabilities with pen or keypad handheld data features are tracked within the Converged Devices category.
The site is working now!
http://www.interdigital.com/
MTJBKH, here's a link to JGoren on SI board, on the same subject...
http://siliconinvestor.advfn.com/readmsg.aspx?msgid=23426400&srchtxt=stasik
MTJBKH, link to Nokia's positions (i.e. faces)...
NOKIA’s PUBLIC POSITION AS A LICENSEE
vs.
NOKIA’s POSITION AS A LICENSOR
http://pcworld.about.com/gi/dynamic/offsite.htm?site=http://www.qualcomm.com/press/legalnewsroom/pdf/NokiaLicensingPositions.pdf
Exerpts:
Nokia’s expert Erik Stasik (formerly
Ericsson’s director of IP Licensing) testified that
FRAND terms are subjective and not determined by
the European Telecommunications Standards Institute
(ETSI). It is determined by the parties themselves
through bilateral negotiations.
Mr. Stasik's Quotes...
“Moreover, there is no standard anywhere of which
I am aware for what is ‘fair’ and ‘reasonable’.
Indeed there is often substantial and bitter
disagreement between essential patent holders and
potential licensees over what these terms mean”
(source: Stasik report, §35);
“RAND (sic) is not determined by ETSI, it is
determined by the parties themselves through
bilateral negotiations conducted in accordance with
relevant law and in the shadow of legal remedies
available to the patent holder – or by appropriate
courts where the parties cannot agree.”
(source: Stasik report, §36)
“Bundled royalty rates for GSM essential patents
owned by a single patent holder are between 2.5%
and 5% assessed on the net sales price of
infringing products. The actual rate depends on the
number of patents bundled together, the relative
importance of the technologies covered, the
strength of the individual patents, and the regions
involved."
For example, a license for a single
essential patent may be 2.5%, a license for two
essential patents can be 3.5% and a license
for three essential patents can be 4%, while a
license for ten or more essential patents rarely
exceeds 5%.”
Does not look like a position of strength when they offer the following:
Qualcomm had offered to pay three times the amount of a "reasonable royalty" so that it could continue using Broadcom's patented technology with no injunction. (Reporting by Gina Keating, editing by Richard Chang)
19.14 576K
moment of truth
–noun
1. critical moment
2. the moment at which one's character, courage, skill, is put to an extreme test
3. The moment Sam has to decide weather to pay 134,000,000 plus and gamble big time at the ITC with “my buddy” Nok or cough up for all Gs, negotiate some sort of minor concession in return, and negate the threat of my infringing imports not entering the US??
In the contracts world it is said that "20% of the contract provisions will cause 80% of the problems". That adage is probably true in the patent writing world, as it relates to single words.
Q3/Earnings Conf-Call Wed Oct31 10am Eastern
http://biz.yahoo.com/cc/7/85947.html