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ok, agreed!
Hi m3s,
I think you misunderstood. I seldom post but I've been long IDCC for many many years.
When we win the arbitration, the more successful Huawei is, the better for us!
Taking a bite out of the big Apple: Huawei challenges iPhone 6S with Mate 8 as Chinese smartphone vendors shift up a gear
http://www.scmp.com/tech/social-gadgets/article/1883608/bigger-screen-cheaper-price-huawei-takes-iphone-6s-mate8-chinese
Chinese brand’s new flagship phone unveiled in Shanghai, CEO claims some of its features leave latest iPhone trailing in its wake.
Chinese smartphone maker Huawei, the world’ s third-largest vendor, revealed its most advanced flagship smartphone in Shanghai on Thursday in what looks like a bold challenge to Apple’s iPhone 6.
The seamlessly designed Mate 8, which is now available in mainland China, is of comparable size to the larger iPhone 6S but with an even bigger 6-inch FHD display. The screen takes up 83 per cent of the phone’s front real estate.
Richard Yu Chengdong, CEO of Huawei Consumer Business Group, directly compared the two models’ battery life, charging speed and screen appearance during his presentation in the early afternoon, which was seen by reporters elsewhere via live video conference.
His conclusion came as little surprise: The Mate 8 is the superior smartphone in many ways.
The model will be available to consumers in other countries early next year. It will get a fuller unveiling at next year’s Consumer Electronics Show, which is due to run from January 6-9 in Las Vegas.
The Mate 8 follows on from the success of Huawei’s Ascend Mate 7, which has sold over 6.5 million units since it was launched little over a year ago.
Huawei has launched several premium smartphones since last year including the P8, P7, Mate 7 as it bids for the higher end of the market. Each one has retailed for 3,000 yuan (US$470) or higher.
As the latest innovation from Huawei’s Mate series, the Mate 8 is the first smartphone to run on the company’s recently announced Kirin 950 chipset while also using its TSMC 16 nm FinFET-plus chip technology, Yu said.
He also highlighted the phone’s i5 intelligent processor, the most powerful co-processor on the market. It supports voice recognition, low-power consumption MP3, all functions of a sensor hub, and fused location provider (FLP) navigation. It also dials back on location-based power consumption.
The 3-gigabyte RAM+32GB ROM Mate 8 will retail for 3,299 yuan, while a 4GB RAM+64GB ROM version will sell for 3,899 yuan.
These prices are at the top end of Chinese smartphones but still considerably cheaper than the iPhone 6 and Samsung’s Galaxy S6.
Chinese smartphone makers have typically targeted lower-middle-class consumers and young people with cut-price devices, but Huawei has recently taken a different tack.
As Yu never tires of informing an audience, Huawei’s goal is to position the brand as the most user-friendly smartphone for global consumers, while offering better value than the iPhone. Some pundits have boldly predicted it may eventually unseat Samsung.
To close the gap with Apple’s iconic smartphones, Huawei is keen to recruit highly experienced and talented foreign staff.
It announced recently that it had hired Abigail Sarah Brody, a former creative director at Apple who worked on the user interface of the first iPhone.
Huawei is set to be the fastest-growing major smartphone vendor this year after selling 27.4 million handsets in the third quarter.
The latest quarter thus put it on course to offload 100 million smartphones this year, up 33 per cent from 2014. Such growth would eclipse similar forecasts for top rivals like Apple and China’s Xiaomi and Lenovo Group.
Great post olddog. Thanks for clarifying.
Hi Loop,
yes, but the CAFC has allowed Nokia to raise this one final argument in any remand proceedings that there is no infringement because their scrambling codes are not transmitted.
That's why I don't quite understand the OUII's contradictory statements.
"in OUII’s view the Commission should allow Nokia to raise this argument on remand"
vs
"OUII continues to hold the view that it is not necessary to reopen the record or to remand any issue to an administrative law judge for further investigation."
I feel like I'm missing something.
arazihk
Many thanks GBR for highlighting those excerpts.
But it seems that the OUII is contradicting himself.
In the first extract he says that in his view the
Commission should allow Nokia to raise this argument on remand.
In the second extract, he says that he continues to hold the view that it is not necessary to reopen the record or to remand any issue to an administrative law judge for further investigation.
So I guess we have to see what they decide to do.
After the 800 decision, I'm just concerned that in the 613 they will still buy Nokia's argument that their scrambling codes are not transmitted.
Regarding the 613 investigation.
In the CC on Friday, Bill Merritt says that based upon what the Federal Circuit did, we’re entitled to an exclusion order based on the record as it exists today.
In the 613 investigation, the CAFC said that
“Nokia argues that that there can be no infringement in this case because the scrambling codes in the Nokia system are not transmitted. Neither the administrative law judge nor the Commission addressed that argument. The agency's decision was not predicated on that rationale, and under well-settled principles of administrative law, we are not free to accept Nokia's invitation to uphold the agency's decision on a ground not ruled on by the agency. ……….That issue, if Nokia wishes to raise it again before the Commission, may be raised on remand.”
Wouldn’t the ITC be bound to allow Nokia to raise their argument in remand proceedings rather than proceeding straight to issuing an exclusion order?
And won’t Nokia raise this argument in any event in the 868 investigation for the power ramp up patents?
Sorry if this has been addressed in some of the technical posts but there seems to be conflicting views of the solidity of the 613 CAFC decision. Bill thinks it’s a straightforward decision but I get the feeling that it may have been undermined by the 800 decision.
Any help?
Many thanks for clarifying OD.
For the 613 case, are we expecting the Final Determination soon?
I thought that the remand investigation had to be done first which could take up to a year from now.
Hi JohnSamuel,
I agree absolutely with everything in your post. I live in Hong Kong, just over the border from Shenzhen, and any time I have travelled there I received the same treatment as you described.
They would have advised him not to leave the hotel by himself under any circumstances.
Also, I have seen no reports of any beatings of a westener in the Hong Kong press recently.
Baz
Are The Technology Patent Wars Threatening To Stomp Out Innovation Across The Entire Industry?
Excerpt: "A recent report by Bloomberg highlighted a company called InterDigital, which owns several patents related to high-speed mobile phone networks. The company recently hired banks to explore the possibility of a sale and since that point the company has gained a whopping $1.4 billion dollars in value to $3.2 billion. If that isn’t ridiculous enough, if the company is ultimately acquired by Google, Apple, Microsoft or some other big tech company it might end up selling for well over $5 billion. The company currently owns more than 8,800 patents and if company’s like Google feel like there is a patent war coming they might be willing to pay premium and a big one for a company like InterDigital. We also saw what happened with the Nortel Networks’ patents that sold for $4.5 billion to a consortium of companies led by Apple and Microsoft. It was widely believed that the companies came together to squeeze out Google and you and you can be sure that Google hasn’t forgotten that. At the time, the Nortel deal was the biggest patent deal in history and with what some believe is an even more attractive patent portfolio(data transfer on mobile phones, 4G wireless, etc) an InterDigital deal could easily beat that."
http://zoknowsgaming.com/2011/07/30/technology-patent-wars-threatening-stomp-innovation-entire-industry/
Here's the link for multiple results (all in chinese unfortunately) using the chinese characters for Beijing core Century (Beijing) Semiconductor Technology Co., Ltd.
http://www.google.com/webhp#q=%E4%BA%AC%E8%8A%AF%E4%B8%96%E7%BA%AA%EF%BC%88%E5%8C%97%E4%BA%AC%EF%BC%89%E5%8D%8A%E5%AF%BC%E4%BD%93%E7%A7%91%E6%8A%80%E6%9C%89%E9%99%90%E5%85%AC%E5%8F%B8&hl=en&start=0&sa=N&fp=274660730b86f000
Each result gives a link to the translation.
I'm trying to get a better translation and find out a bit more about this company:
Beijing core Century (Beijing) Semiconductor Technology Co., Ltd.
It seems to be a joint venture company founded last year.
There are lots of results if you search for the company name using the chinese characters.
InterDigital transfers SlimChip 3G core technologies to the Beijing core century (Beijing) semiconductor science and technology Limited company
http://live.intozgc.com/211/211517.html
[my note - google translation follows]
to enter Zhongguan Village[manufacturer] Author: Manufacturer chief-editor: Happy date: on May 18, 2010 10:54 Beijing, China and Pennsylvania Prussia king city - - May 19th, 2010 - -
Beijing core century (Beijing) semiconductor science and technology Limited company (Beijing core) and InterDigital Corporation (NASDAQ: IDCC) today announced together that the Beijing core and InterDigital correspond the Limited company to achieve the 3G technology transfer and the authorized agreement.
InterDigital will transfer it SlimChip™Modem the core technologies, and will integrate in the Beijing core 3G mobile termination baseband core chip.
The InterDigital SlimChip3GModem core technologies supports the HSPA standard, and compatible UTMS3GPPRelease6 standard.
Beijing, China, and the King of Prussia, Pennsylvania City - May 19, 2010 - Beijing Core Century (Beijing) Semiconductor Technology Co., Ltd. (Beijing core), and InterDigital Inc. (NASDAQ: IDCC) today announced that Beijing-core and InterDigital Communications Co., Ltd. reached a 3G technology transfer and licensing agreements. InterDigital will transfer its SlimChip ™ Modem core technology, and integrated 3G mobile terminal in Beijing core baseband core chip.
InterDigital's SlimChip 3G Modem HSPA core technology to support standards and compatible with UTMS 3GPP Release 6 standards. InterDigital will provide comprehensive technical support to ensure SlimChip Modem effective integration of core technologies in Beijing, the current development of 3G core mobile baseband core chip products. Beijing core and InterDigital also reached consensus on technology licensing win-win business.
"IDC as the world's most important R & D base and suppliers of wireless technology, is a respected business, we are very pleased with this one are popular worldwide attention, competitive excellence established close business partnership, "said the gob president of Beijing-core," Beijing will be the core and the IDC 3G-4G R & D core chip, all-round strategic partnership. Beijing core company first developed in the 3G core chips used in InterDigital's SlimChip Modem Technology and use it as an opportunity to further develop bilateral cooperation in more directions. bilateral strategic cooperation to build Beijing as the Beijing municipal government on the mobile phone industry chain and the strategic industrial base in Silicon Valley formed part of the strategy, implementation and development the necessary development platform and scale for future industrial development and technological foundation laid. "
"We are very honored to Beijing's choice of our core market-proven technology over the SlimChip Modem 3G chips for their products", InterDigital CEO William • J • Merritt said, "Today, our core technology has been used in the world Modem tens of millions of 3G terminal products and equipment. we here's technology core strength and core chips to become a top 3G supplier plans drawn impressive. We are convinced that the two companies jointly developed technology solutions China's 3G market will further promote more rapid development and growth.
On Semiconductor Co., Ltd. Beijing Core:
Letter from the German core companies in Beijing and the Beijing Yizhuang International Investment Group co-invested one billion yuan in August 2009 in Yizhuang Economic and Technological Development Zone was incorporated. Dickson Group is a large mobile phone industry group, its industries include: the design of mobile phone R & D, parts, production, processing, mobile operators and network games brand. Yizhuang, Beijing Economic and Technological Development Zone, the international financing platform for the leading full use of market-oriented means of capital operation, to absorb and integrate various types of social capital, to provide capital to support industrial development zone. Beijing core company committed to developing 3G-4G mobile communication core chip technology, the supply of 3G-4G terminal core chip and motherboard solutions, and innovative solutions to the chip and multimedia content and value-added services combined. 3G and 4G mobile strive to become a wireless communications technology market leader in providing differentiated complete solution to the world a new experience, to make technology more close to life.
About InterDigital Company:
InterDigital to focus on developing the most basic and most central and widely used wireless technology worldwide mobile devices, networks and services. We have solved many of the industry's most critical and most complex technology challenges, and invented many of the leading technology solutions and effectively used in broadband networks and rich multimedia experience on the. InterDigital and the world's many leading wireless technology development companies in technology licensing, and formed a strategic partnership.
InterDigital transfers SlimChip 3G core technologies to the Beijing core century (Beijing) semiconductor science and technology Limited company
http://live.intozgc.com/211/211517.html
[my note - google translation follows]
to enter Zhongguan Village[manufacturer] Author: Manufacturer chief-editor: Happy date: on May 18, 2010 10:54 Beijing, China and Pennsylvania Prussia king city - - May 19th, 2010 - -
Beijing core century (Beijing) semiconductor science and technology Limited company (Beijing core) and InterDigital Corporation (NASDAQ: IDCC) today announced together that the Beijing core and InterDigital correspond the Limited company to achieve the 3G technology transfer and the authorized agreement.
InterDigital will transfer it SlimChip™Modem the core technologies, and will integrate in the Beijing core 3G mobile termination baseband core chip.
The InterDigital SlimChip3GModem core technologies supports the HSPA standard, and compatible UTMS3GPPRelease6 standard.
Beijing, China, and the King of Prussia, Pennsylvania City - May 19, 2010 - Beijing Core Century (Beijing) Semiconductor Technology Co., Ltd. (Beijing core), and InterDigital Inc. (NASDAQ: IDCC) today announced that Beijing-core and InterDigital Communications Co., Ltd. reached a 3G technology transfer and licensing agreements. InterDigital will transfer its SlimChip ™ Modem core technology, and integrated 3G mobile terminal in Beijing core baseband core chip.
InterDigital's SlimChip 3G Modem HSPA core technology to support standards and compatible with UTMS 3GPP Release 6 standards. InterDigital will provide comprehensive technical support to ensure SlimChip Modem effective integration of core technologies in Beijing, the current development of 3G core mobile baseband core chip products. Beijing core and InterDigital also reached consensus on technology licensing win-win business.
"IDC as the world's most important R & D base and suppliers of wireless technology, is a respected business, we are very pleased with this one are popular worldwide attention, competitive excellence established close business partnership, "said the gob president of Beijing-core," Beijing will be the core and the IDC 3G-4G R & D core chip, all-round strategic partnership. Beijing core company first developed in the 3G core chips used in InterDigital's SlimChip Modem Technology and use it as an opportunity to further develop bilateral cooperation in more directions. bilateral strategic cooperation to build Beijing as the Beijing municipal government on the mobile phone industry chain and the strategic industrial base in Silicon Valley formed part of the strategy, implementation and development the necessary development platform and scale for future industrial development and technological foundation laid. "
"We are very honored to Beijing's choice of our core market-proven technology over the SlimChip Modem 3G chips for their products", InterDigital CEO William • J • Merritt said, "Today, our core technology has been used in the world Modem tens of millions of 3G terminal products and equipment. we here's technology core strength and core chips to become a top 3G supplier plans drawn impressive. We are convinced that the two companies jointly developed technology solutions China's 3G market will further promote more rapid development and growth.
On Semiconductor Co., Ltd. Beijing Core:
Letter from the German core companies in Beijing and the Beijing Yizhuang International Investment Group co-invested one billion yuan in August 2009 in Yizhuang Economic and Technological Development Zone was incorporated. Dickson Group is a large mobile phone industry group, its industries include: the design of mobile phone R & D, parts, production, processing, mobile operators and network games brand. Yizhuang, Beijing Economic and Technological Development Zone, the international financing platform for the leading full use of market-oriented means of capital operation, to absorb and integrate various types of social capital, to provide capital to support industrial development zone. Beijing core company committed to developing 3G-4G mobile communication core chip technology, the supply of 3G-4G terminal core chip and motherboard solutions, and innovative solutions to the chip and multimedia content and value-added services combined. 3G and 4G mobile strive to become a wireless communications technology market leader in providing differentiated complete solution to the world a new experience, to make technology more close to life.
About InterDigital Company:
InterDigital to focus on developing the most basic and most central and widely used wireless technology worldwide mobile devices, networks and services. We have solved many of the industry's most critical and most complex technology challenges, and invented many of the leading technology solutions and effectively used in broadband networks and rich multimedia experience on the. InterDigital and the world's many leading wireless technology development companies in technology licensing, and formed a strategic partnership.
Best of the Best 200 Small Companies: Part 2
Recs
6
Follow
Report
November 14, 2009 – Comments (1) | RELATED TICKERS: IDCC , AVAV , HWKN
Forbes Magazine just had their special on the "200 Best Small Companies" in the November 2nd issue. I figured this would be a great starting point to search for potential investments because of course some of these "Best Small Companies", will end up being tomorrows "Best Large Companies", so therefore some investment opportunities probably exist within this group.
After looking at all 200 of these companies, I’ve selected a group that I think are good candidates for being successful investments. Below are the next 5 that I think are really worth taking a close look at.
IDCC (InterDigital Inc.)
InterDigital is a technology vendor to cell phone companies, along with other devices that use IEEE wireless communication, and license out the patents they have to these customers. They have over 3,000 patents, with nearly 9,000 more in process. This is a huge growth area as according to their last conference call, wireless data traffic is expected to grow ten-fold over the next 5 years (think youtube videos on cellphones). They are working on developing solutions for the bandwidth crunch that is happening.
This past quarter they grew revenues a full 37%, and earnings by 232%! Since they are indeed highly profitable, you would think a high premium would have to be paid for this type of growth along with their vast portfolio of patents. Fortunately this is not so. This stock is trading at 19 times trailing earnings and just 7 times forward estimates! Analyst have been bumping up their estimates over the past 90 days, and are predicting an average of 21% per annum growth for the next 5 years. If they are even close with these estimates, this stock is not going to be trading at just 7 times those earnings.
Furthermore, this company is SOOO ridiculously cheap because on their $957 million market cap, they have $430 million in cash and virtually no debt! Management has already proven they are shareholder friendly since in March they authorized a $100 million stock buyback and have purchased about a million shares already with this.
Listen to the conference call that happened on October 29th. About 4/5ths the way through it gets funny, and then real serious. The analyst's first words are "oh sh*it" as he thought he was disconnected from the call, then later... well, lets just say it's not the last time you'll hear the word "sh*it!" or "my God!") in the CC. He makes some great points on how ridiculously cheap this company is and that management should be spending everything they can on repurchasing as much as this company as they can vs. earning a measly 0.5% to 1% on their cash holdings.
http://caps.fool.com/Blogs/ViewPost.aspx?bpid=294010&t=01008896777928732778
From the ruling:
"....Moreover, as Samsung argued, the administrative law judge, during the hearing, ruled that certain exhibits, including the filings at issue here, should not come into evidence without testimony at the hearing..."
The bold indicates that this evidence was not necessarily overlooked by our lawyers. Perhaps as you suggest they threw it in after the hearing finished on the off chance that it got accepted.
"Nokia will be paying lower royalty rates than it was under the earlier agreement, Nokia Chief Financial Officer Richard Simonson said in a phone interview."
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVOsS_AAnft0&refer=home
"Nokia spokeswoman Laurie Armstrong said that the royalty rates under the new agreement were lower than those under its previous agreement with Qualcomm."
http://www.reuters.com/article/ousivMolt/idUSWEN688020080724?sp=true
Thanks should go to Vijay Nagarajan.
It's his latest posting at wirelessanalyst.blogspot.com.
Check the link at the bottom of my message.
How to look for IDCC in 3G iPhone?
Sunday, June 8, 2008
The 3G iPhone is expected to launch soon at the WWDC. One of the primary component winners likely is Infineon. The company’s cellular chipset is expected to drive the iPhone. As we wait for the teardown, I was asked by a good friend how we would know if IDCC is in the iPhone. He specifically wanted me to address the issue with respect to the latest IFX 3G product announcements. Here is my take on it.
Firstly, IDCC will get licensing fees from Apple as per agreements signed last year. The agreement covers 2G and 3G iPhones to be sold in the near future. So, irrespective of whose 3G components are in the iPhone, IDCC gets money from Apple.
Secondly, there will be money coming if Infineon’s 3G baseband is in the iPhone. In light of the recent product announcements by Infineon, I need to be careful when I make that statement. So, let me step back and reflect on the impending 3G iPhone. I wrote in the past that I expect to see the MP-EH platform with the S-GOLD3H baseband chip in the 3G iPhone. The company has rechristened its products since. The HSDPA capable MP-EH platform is now the XMM 6080 while its 3G baseband chip - PMB8878 - previously known as the S-GOLD-3H (H indicating HSDPA capability) is now the X-GOLD 608. Read more on this subject here and here.
Further, the 3G software stack that will be used in the MP-EH/S-GOLD3H combination was jointly developed by InterDigital and Infineon’s subsidiary Comneon. So, IDCC will get per-unit royalty from Infineon for use of the stack. While the software collaboration is public, I am inclined to speculate based on recent modem performance data that IFX 3G chips use some baseband receiver design IP from IDCC. This can be an additional source of per-unit royalty for IDCC.
Recently, Infineon announced an array of X-GOLD61x HSDPA/HSUPA products that drastically reduce on power and space apart from catering to multiple phone market segments. Furthermore, the company also announced specifically that the stack for the X-GOLD61x solutions is internally developed. While this announcement gives more design control to Infineon, it implies that IDCC will not receive per-unit royalties for the software stack on the 61x series. On the other hand, I am still bullish (read speculation) about the use of IDCC’s physical layer receiver IP in all of Infineon’s 3G offerings. Also, while I think these new products are part of Infineon's push to hold on to Apple for future designs in the face of increasing competition, I would be greatly surprised if I see any of these 61x chips in the first 3G iPhone.
In summary, look to see if the iPhone teardown reveals Infineon’s PMB8878/X-GOLD 608/S-GOLD-3H baseband. So, the best case scenario for IDCC is for the iPhone to have a heart of Gold! Even otherwise, the King of Prussia-based company will gain from Apple’s licensing fees.
http://wirelessanalyst.blogspot.com/2008/06/how-to-look-for-idcc-in-3g-iphone.html
Samsung multi-sources 3G now
Thursday, May 29, 2008
Samsung announced recently that it was sourcing 3G chipsets from Infineon as well. This is yet another indication of the larger trend amongst handset makers to source from multiple chipset-vendors. While this is a jolt to Qualcomm's 3G market share expansion plans, it is great news for Infineon and its 3G ally, InterDigital.
The move away from Qualcomm is significant on at least three counts. Firstly, it suggests that as much as performance is important for data networks, the competition has succeeded in narrowing Qualcomm's lead there. Secondly, the lower cost of Infineon's solution speaks well of the company's IP position. Thirdly, it expands InterDigital's 3G product footprint.
It is bad news for Qualcomm. One of the key reasons for Samsung's move is that it found a viable performance alternative for a cheaper price. That underscores the issue for Qualcomm. Until now, the company was charging a premium for its superior performance and its support network. However, as a recent Signals Research Group report points out, there are at least three other solutions with comparable performance in the market today, Infineon being one of them. These alternatives become attractive if the handset vendors discount Qualcomm's reliability and support.
It is good news for Infineon. The company is expected to be central to the 3G iPhone. With design wins at Samsung, the German semiconductor company will grow its 3G market share at the expense of Qualcomm. With the lower overhead coming from its comfortable IP position, Infineon can afford to undercut Qualcomm's pricing to gain further traction.
It is better news for InterDigital. The company supplies the 3G software stack for Infineon's solutions and stands to make money off every 3G Infineon chipset sold. So, while the King of Prussia-based company is involved in a prolonged legal battle with Samsung on IP issues, this will open up another channel of revenue from the Korean handset maker.
InterDigital's SlimChip, though one of the best, has not got substantial direct traction in the market. On the other hand, the company, through its alliance with Infineon and its product IP core licensing initiatives, is looking to expand its footprint at a fast rate. Apart from the Samsung design win, I am particularly curious how 3G will play out between STM and Nokia. (Stay tuned for an analysis of how InterDigital may benefit from the STM-Nokia relationship in the wake of recent industry events.)
In summary, Samsung has reiterated the move towards multi-sourcing. Like some of the other wireless segments, pricing and time-to-market will likely drive mobile baseband as well. That is if Qualcomm's competitors can stand up to its deep pockets and deliver consistently.
http://wirelessanalyst.blogspot.com/2008/05/samsung-multi-sources-3g-now.html
Boenning & Scattergood
Shares of IDCC are up roughly 15% after an InterDigital 8-K revealed that InterDigital and Nokia are in settlement discussions and have made substantial progress towards a resolution of all disputes between them. While the messaging in the 8-K lacks clarity and does not necessarily indicate that a 3G licensing deal between InterDigital and Nokia is imminent, we believe Nokia’s legal tactics will eventually run aground and a deal with InterDigital should be inked. However, we are still unsure as to deal timing — it could happen today, next week, or in five months — as unfortunately today’s filing did not improve our visibility.
We maintain our belief that recent positive deal momentum (i.e. RIMM, Apple, and Giant Wireless) will ultimately help produce outsized returns for investors looking to capitalize on the growing 3G marketplace.
We believe the long term risk/reward ratio of owning IDCC shares is favorable, even after today’s run, and recommend acquiring shares at current price levels before new licensing deals are inked or ahead of what we expect will be favorable rulings in the ITC and District Court of New York proceedings.
We are maintaining our Market Outperform rating and $29 price target.
Key Points:
• InterDigital shares jump on hopes of a settlement with Nokia.
• ITC staff opinion to be released in the near term, despite Nokia’s attempt to remove itself from the ITC proceedings.
• Although management’s black-box approach presents a challenge to accurately forecasting future business we continue to believe InterDigital shares offer investors a sound way to play the growing 3G handset market.
http://www.boenningandscattergood.com/news/files/IDCC%20(2008.3.24).pdf
but even if Nok settles, the Staff Report will still be issued in respect of Samsung.
It doesn't have a sexy brand name, and its headquarters are far from Silicon Valley. But InterDigital Inc. might be a winner in the cellular-telephone industry's move to multimedia phones.
The King of Prussia, Pa., company owns an array of patents on wireless technology that it contends are essential to making the high-speed-data phones that let people watch videos and surf the Web. Among companies to license its patents are iPhone maker Apple Inc. and BlackBerry maker Research In Motion Ltd. But industry giants Nokia Corp. and Samsung Electronics Co. have resisted.
From this month through November, the U.S. International Trade Commission is set to issue a series of opinions and rulings on whether Nokia and Samsung have infringed InterDigital's patents. If InterDigital wins -- and a court decision in the United Kingdom augurs in its favor -- Nokia and Samsung would come under new pressure to sign licensing deals.
Fees from those deals might double InterDigital's revenue over the next few years.
And that would likely give a jumpstart to its stock price, which lately has languished near its 52-week low of $16.47. The shares fell 18 cents, or 1.1%, to $16.96 on Nasdaq yesterday.
Some on Wall Street are betting InterDigital will win. Glenmede Investment Management LP, which has owned InterDigital stock since 2003, doubled its holdings this past fall.
"People want to be able to watch videos and do teleconferencing from their cellphones and [Samsung and Nokia] would only be putting themselves at a disadvantage if they didn't ultimately settle," said Chris Colarik, portfolio manager at Glenmede, which held 124,000 shares at the end of December.
The dispute is the latest in a series of wireless-patent lawsuits in recent years, with little-known patent holders frequently prevailing against larger makers. NTP Inc., for instance, won a $612 million settlement from Research In Motion in 2006, while chip maker Qualcomm Inc. last year lost a case before the ITC involving Broadcom Corp. Qualcomm is fighting the case, though some U.S. carriers that use Qualcomm chips have agreed to pay royalties to patent-holder Broadcom.
InterDigital's case comes as multimedia phones have become the fastest-growing segment of the $150 billion cellphone market. About 10% of the 1.1 billion cellphones sold world-wide last year were 3G, the technology that powers multimedia or "smart phones."
The market is expected to more than double to 240 million units this year, research firm Strategy Analytics estimates.
Nokia and Samsung accounted for about half the cellphones sold last year, including half of the 3G phones. Both hope to expand in the U.S., where leader Motorola Inc.'s market share is eroding. The patent dispute with InterDigital might hinder those hopes. The ITC can ban imports of handsets containing infringing technology, as it did last year to phones using Qualcomm chips. An adverse ruling from the ITC would likely force Samsung and Nokia to negotiate licensing deals with InterDigital.
Nokia asked a federal court in New York last month to prevent InterDigital from proceeding with its claim at the ITC and to require arbitration or decide the dispute itself. The ITC hasn't altered its schedule.
A United Kingdom court decision in December bodes well for InterDigital's case against Nokia. The Finnish phone behemoth had sued InterDigital in the English High Court of Justice, asking a judge to rule that a group of InterDigital's patents wasn't essential to the European 3G standard. Instead, the judge ruled that one was essential, and Nokia withdrew its challenge to another. Because the ITC is reviewing the patents InterDigital selected and considers the strongest, InterDigital is expected to have a greater chance of winning.
A Nokia spokeswoman said the U.K. decision "establishes that most of the patents that Nokia challenged were found not to be essential."
But even one essential patent can be valuable. In the case of Broadcom, a U.S. district judge in Santa Ana, Calif., ordered Qualcomm to pay a royalty rate of 6% of its per-phone revenue for the use of one patent, and 4.5% for a second. The ITC is considering five InterDigital patents in its case against Samsung and four in the case against Nokia.
Based partly on the London decision, Tom Carpenter, a telecom analyst at Hilliard Lyons in Louisville, Ky., in January raised his rating on InterDigital to "buy." He said he believes the ITC's early rulings will be in InterDigital's favor and pressure Nokia and Samsung to negotiate.
While InterDigital never became a player in telecommunications equipment, its patent portfolio has generated $1.5 billion in licensing fees since 2000. Much of that was for patents for roaming and other technologies used in basic digital cellphones.
Nokia and Samsung have for years fought InterDigital in court over an earlier technology known as 2G. InterDigital won a $253 million payment from Nokia in 2006 and forced Samsung to post a $167 million bond in December, pending appeal of an arbitration.
If InterDigital wins the 3G case at the ITC, it could earn licensing fees of $1 or more per phone, bringing in $1 billion over the next five years.
Still, there is a big risk. If InterDigital loses at the ITC, its stock could fall another $5 or $10, Hilliard's Mr. Carpenter estimates, as its long-term royalty prospects decline.
http://online.wsj.com/article/SB120477536453016017.html?mod=googlenews_wsj
Boenning & Scattergood Updates Investment Opinion on InterDigital, Inc.
Licensing deal with Research In Motion (RIM) gives us further confidence that InterDigital will be able to continue to drive recurring royalty revenue growth in the coming periods while also moving the company closer to signing other top tier OEMs.
Shares of IDCC have suffered recently as investor attention has been primarily focused on the uncertainty surrounding the ITC court cases with Nokia and Samsung, but now having closed two deals in as many months we believe this licensing momentum could act as an upward catalyst to the stock price in the coming months.
We continue to believe shares of IDCC remain one of the best options for investors who are looking for a pure play on growth in the 3G cellular market and would recommend acquiring shares at current price levels as we anticipate the deals with RIM and Apple will be a harbinger of good things to come. We reiterate our Market Outperform rating and $37 price
target.
Key Points:
• 3G Licensing deal with Research In Motion (RIM) announced.
• Key takeaways from 10/12/07 investor meetings in New York City.
• In our opinion shares of InterDigital continue to trade at a discount to the business’s fair value.
http://www.boenningandscattergood.com/news/files/IDCC%20(2007.10.14).pdf
Boenning & Scattergood abstract re Apple
Licensing deal with Apple Inc. gives us further confidence that InterDigital will be able to continue to drive recurring royalty revenue growth in the coming periods while also moving the company closer to signing other top tier OEMs. Shares of IDCC have suffered recently as investor attention has been primarily focused on the uncertainty surrounding the ITC court cases with Nokia and Samsung, but we believe the deal with Apple could act as an upward catalyst to the stock price beyond today’s activity in the coming months. We continue to believe shares of IDCC remain one of the best options for investors who are looking for a pure play on growth in the 3G cellular market and would recommend acquiring shares at current price levels as we anticipate the deal with Apple will be a harbinger of good things to come. We reiterate our Market Outperform rating and have lifted our price target to $37 (from $35).
Key Points:
• IDCC announces licensing agreement with Apple Inc. covering the iPhone.
• Financial terms of the deal somewhat disappointing, but the Apple name makes up for it.
• Deal with Apple could put the screws to Nokia and Samsung.
• Valuation analysis, guidance update, and model changes
http://www.boenningandscattergood.com/news/files/idcc_09.07.07abstract.pdf
interestingly, the article also states that "Section 337 offers the potential for obtaining a "general" exclusion order which will bar infringing imports from all sources, including companies and exporters that may not have been specifically named as a respondent in the Section 337 case."
Baz
Count,
<Q – Tom Carpenter>: Then when you were answering Nasgovitz’s question just then talking about it doesn’t matter if you – whether you license people in 4Q ’06 or 1Q ’07, were you saying that if there isn’t a new 3G license in 4Q ’06 or if there would be in 1Q ’07 it might just be timing issues or were you just using that as an example?
<A>: I just used that as an example. I mean we certainly have deals that as I’ve always said at the different levels of maturity. So we would hope to be able to push some over the line sooner rather than later but again I’ve been through these things enough times I think as I’ve told you before Tom, they’re done once you sign them and sort of no time before that.
<Q – Tom Carpenter>: Sure, sure. And since we're on the topic, I'll take a shot here. Are any of the discussions with 3G manufacturers at the economic level as in rates or percentages?
<A – William Merritt>: Yeah. As I said, we tend to have these discussions across all the area because that's actually the best way to use the team. Because you have people within the team are sort of technically oriented so they're handling that part. You got other people that are more sort of business, contract and terms oriented so you can sort of maximize the use of the team by having the discussion at different levels.
Baz
Page 3 & 4 of the http://wirelessledger.com/idcc_Dec6_show_case_doc.pdf states that the arbitration will continue since "it will impact other ongoing litigation...", specifically the UK litigation.
Arazihk
see ronnie's previous post
http://www.investorshub.com/boards/read_msg.asp?message_id=13160581
More 'foolish' discussion of IDCC from one of the Motley Fool's top posters...
25th March 2006
http://boards.fool.com/Message.asp?mid=23884727
(subscription only)
InterDigital (IDCC)
Price: $25.30
S&P500 1307.25
Stock Advisor History:
InterDigital was recommended in the April issue of Stock Advisor on March 17, 2006. The price remained in a narrow range and closed the day $25.30. The PE at the time was 26.35 with an * attached.
Business:
The company creates technology, or new ways of doing things that support new standards in the wireless industry. They produce no products, thus carry no inventory. In 2004, they created wireless solutions for Wireless Local Area Network (WLAN) market, wideband Code Division Multiple Access (CDMA) solutions for the cellular market, as well as interference management solutions that enhance WLAN markets. Are they the only ones that work on these enabling technologies? No! But they are very good at what they do and with the Third Generation wireless networks gathering steam and with IDCC many patents in the 3G arena, they look to conquer a new market.
They will be successful if they can continue to produce technologies that make wireless products easier to use, more efficient, greater range, smaller size, longer battery life or cheaper etc. If cell phone manufacturers deem their technologies cutting edge and an advantage over technologies they can create in-house, then not to use them would place them at a disadvantage to competitors. If they use them, they must license them from IDCC and pay royalties.
The royalty based business model has disadvantages and advantages. The advantage the company (idcc) doesn't have to carry inventory, they basically sell know-how. They are often paid in lump sums which float almost in their entirety to the bottom line. The disadvantage is obvious if you look at the earnings history. Earnings growth is volatile; there will be lean quarters and fat quarters depending on lump sum payments. And they are likely to be in court a lot enforcing patents, much like the generic drug companies. It becomes a way of doing business. The goal, is at some point, to have a steady stream of royalty payments which will create steady earnings growth and a more predictable stream of cash flow.
They currently have technologies that are being adopted and that have been involved in winning court battles that could easily ramp up the bottom line unexpectedly in what might be a big surprise to shareholders. Even if court battles continue to be drawn out, they are increasing their recurring royalty base. It is this segment that will start to smooth out earnings as the years pass. The one time lump sums will cause earnings to be somewhat erratic but add to cash reserves.
Revenue history:
2006 2005 2004 2003
Q1 35.50 33.02
Q2 38.60 29.38
Q3 48.54 7.36
Q4 40.49 33.93
Total 161.1 103.7
2006 2005 2004 2003
Q1 est .19 -.02 .10 .45
Q2 .07 .01 .05
Q3 .11 -.12 .06
Q4 .80 ~0 .02
Total $1.17 .96 ~0 .58
Weighted average number of common shares outstanding – basic
2005 2004 2003 2002 2001
54,058 55,264 55,271 52,981 53,446
Weighted average number of common shares outstanding – diluted
57,161 59,075 59,691 56,099 53,446
Comment on the LU litigation from BRational on the Motley Fool Board
http://boards.fool.com/Message.asp?mid=20457200
The question by mberan on WCDMA patent litigation triggered a brief search and return to a subject we need to keep close tabs on—though not nearly as close as an IDCC investor would need to.
As far as I'm aware, there are currently only two significant CDMA IPR-related lawsuits. One is the breach of contract lawsuit that QCOM has filed against TI, which we have discussed at length on this board; there does not seem to be much new pubicly released information on the case. The other is a much more recent lawsuit that IDCC has brought against Lucent Technologies for infringement on CDMA 2000 (1X) patents held by a company called Tantivy Communications, which IDCC acquired this past July (presumably because they saw the potential for litigation on its behalf—recall that IDCC's CEO is a lawyer, whose strategy for the company is built on litigating its way to the bank).
For those unfamiliar with the Lucent lawsuit, IDCC's web site has this press release:
http://ir.thomsonfn.com/InvestorRelations/PubNewsStory.aspx?partner=5303&storyId=108626
Also, at:
http://www.wirelessweek.com/index.asp?layout=document&doc_id=131500&verticalID=34&vertic...
Neither are particularly informative, and a search on Lucent's web site reveals not even a hint of a response. Lucent has been, and still is, one of the leading infrastructure vendors of CDMA 2000 systems. If IDCC prevails, I suspect Nortel and Motorola may not be far behind. Qualcomm on the other hand is safe from IDCC in the CDMA 2000 realm, as a long-ago settled case left Qualcomm with a royalty-free license to all claimed IDCC patents in TIA/EIA 95 (2G CDMA). Qualcomm is also shown as holding licenses to IDCC's portfolio in WCDMA and TD_SCDMA, according to a table listing all IDCC licensees by technology area (http://www.interdigital.com/tech_products_licensing_table.shtml). This is an interesting Table, that I had not seen previously, and that others on this board might find of interest as well. Lucent, predictably, does not appear on the list of licensees, neither does Nortel, or Motorola for that matter.
Patent litigation seems to be such an integral part of the wireless business, it seems to detract from the real business of creating and deploying advanced products and services for consumers. I just came across a good recent discussion of the role of litigation in this arena, in the Register, at:
http://www.theregister.co.uk/content/69/36080.html
A notable quote from that article, of relevance here:
Qualcomm itself would not have a successful business model were it to drop its actual chips and rely just on its CDMA portfolio, and it does not just license patents but adds significant value to its licensing program in the shape of know-how and methods, which only come through real experience of a market. (emphasis by BRational).
Other useful insights:
Patent law may exist to encourage innovation by protecting inventors' rights, but it can often have the opposite effect, embroiling companies in expensive and bitter - and often frivolous - legal battles to the detriment of their real business.
Of course, it is important to defend IP from theft. But too often, companies are fending off rivals in the courts because they have been unable effectively to do it on the open market, with the old-fashioned techniques of strong product development, robust channels to market and good marketing. Such battles raise prices and postpone, rather than avoid, shake-out and may even lead to the 'wrong' players - from the user's point of view - surviving.
The take away: The IPR model by itself would have never succeeded had it not been backed by real, market-competitive technology, and had Qualcomm not aggressively promoted and invested in the development of an entire industry around its technology. At one point Qualcomm was the IPR holder, the infrastructure builder and installer, the chipmaker, the handset maker, and the content provider, as well as the investor and finance-provider to fledgling carriers. The company and the CDMA industry have come a long way up the respectability and profitability paths, as has the wireless industry—without the kind of competitive pressure that CDMA carriers have injected into the global marketplace, GSM carriers would have been content just changing faceplates on handsets with monochrome screens, and 3G WCDMA would have been even further away as an everyday commercial consumer reality. A unique set of circumstances and astute strategic moves have allowed Qualcomm to emerge into the powerhouse it has become, distinctly shaping the industry it is in. IDCC has good technology, excellent engineers, and astute aggressive lawyers. That still does not, and will not, make it, “another” Qualcomm.
BR
Nokia Turns CDMA Page
(interesting snippet on royalties at the end of the article)
By Scott Moritz
Senior Writer
11/12/2003 05:05 PM EST
http://www.thestreet.com/_tscana/tech/scottmoritz/10126218.html
After three lean years in the fattest part of the wireless industry, Nokia (NOK:NYSE ADR - commentary - research) is finally ready to make up for lost time.
On Wednesday, the Finnish cellphone giant laid out plans to accelerate its long-awaited catch-up efforts in the booming CDMA, or code division multiple access, wireless phone market now dominated by Qualcomm (QCOM:Nasdaq - commentary - research) and its allies. Nokia said at an analyst meeting in New York that it would roll out as many as 12 new CDMA phones by the end of 2004.
Nokia has completed 60% of its retooled CDMA strategy and by next year the company will be fully on track, said Soren Petersen, chief of Nokia's CDMA phone unit. Peterson also told analysts that the company will offer a broad line of CDMA handsets including mega-pixel camera phones and "non mono-block" units -- the folding phones the company has previously shied away from. On Wednesday, Nokia surged 66 cents to $17.74.
Rare Setbacks
Cracking the CDMA market has ranked among the handset giant's greatest challenges, and most bitter failures, in recent years. While Nokia is the leader by far in worldwide handset market share, at around 38%, it has achieved that dominance almost entirely in the European-based standard global service for mobile, or GSM, market.
And after spending 12 years and more than $1 billion on CDMA development, Nokia has had little to show for its efforts. In fact, the company's last bold entry into the market, in 1999, saw Nokia fall flat on its face as its new phones turned out to be defective. Nokia CDMA phones then all but vanished from the market until this year.
"In a perfect world, we wouldn't have those years," said Petersen, a gruff Dane who didn't try to dismiss the impact of the company's CDMA failure and the tarnish it put on Nokia's otherwise shiny image. The defect, according to Petersen, wasn't in the chipset or the software, as many had believed -- it was simply the phones' weak antenna reception, says Petersen.
It seems those problems may be behind Nokia. Last month, the company said it had doubled its CDMA market share from year-ago levels, to 15%. Much of that growth has come in China, India and North America. But investors haven't seen this as entirely great news. What Nokia gains in CDMA sales and market share, it loses in margins and average phone prices, given the prices and costs associated with the current crop of CDMA units.
Though this year has been a relative success for Petersen and his CDMA team, the company failed to get its camera phone accepted by Verizon (VZ:NYSE - commentary - research) or Sprint PCS (PCS:NYSE - commentary - research) in time for the holiday buying season.
Verizon Wireless is a critical win for any CDMA phone maker. Not only is it the nation's largest cellphone service, but it also subjects phones to a notoriously long and stringent testing period. Though the rigorous tests are important, insiders say Verizon is also known to rotate its favorite phone suppliers, which at the moment appears to be Korean electronics giant LG.
Nokia has long faced a culture clash of sorts. In recent years, CDMA users have taken a liking to folding or "clamshell" phones. Nokia has only recently softened its stance on phone architecture to incorporate foldup phones and pop-open keyboards.
And then there's the matter of antennas. Nokia has stubbornly stuck with stubs and internal antennas, while notably Verizon has typically insisted that all its phones have pullout antennas. However, Nokia did manage to get an internal antenna phone accepted and available with Verizon last month.
What Next?
Beyond handsets, Nokia officials at the New York conference dispelled rumors that the company was about to buy Psion, a London PDA operating system developer that it has a large stake in. Petersen did say that some of the 2004 phones will incorporate Psion's Symbian system.
On CDMA patents, Petersen said there were no current problems with the royalty payments Nokia makes to Qualcomm, but added that it was highly unlikely that Qualcomm will be able to maintain its current royalty stream. Qualcomm gets a cut of the revenue on all CDMA handset sales and controls about 90% of the CDMA chip market.
But the company can't expect to keep high royalties, said Petersen. "It kills the business over years -- the model is just too expensive," he said.
Neither Nokia nor Qualcomm has commented on the terms of their patent licensing deals. But Qualcomm has said that it has prevailed in previous challenges to its intellectual property claims, namely in wins against Motorola and Ericsson over the past several years.[b\]
Qualcomm is currently in court fighting chipmakers Texas Instruments (TXN:NYSE - commentary - research) over patent rights.
Vodafone eyes Japan firms for 3G
Sun 9 November, 2003 09:26
http://www.reuters.co.uk/newsPackageArticle.jhtml?type=businessNews&storyID=400806§ion=f...
LONDON (Reuters) - Vodafone has placed orders for millions of next generation mobile phones for its 3G services with Japanese firms, in a snub to the world's top handset maker Nokia, the Sunday Telegraph has reported.
The newspaper quoted an unnamed senior executive at the world's largest mobile phone company by sales as saying Finland-based Nokia did not yet have handheld devices with all the functions Vodafone wanted.
It said the official did not name the Japanese firms which would get the orders, but quoted him as saying Vodafone had arranged for "substantial purchases" on the expectation mass market sales would take off.
Vodafone was planning to roll out its 3G or third generation services next year, the newspaper said.
Vodafone officials were not immediately available for comment.
The firm already sources a lot of the handsets for its Live! service from Japan's Sharp Corp. The picture messaging service is a forerunner to its 3G service.
3G services offer real-time video calls, music downloads and a host of other Internet-based services in addition to voice telephony and text messaging.
Vodafone hangs up on Nokia with Japanese 3G supply deal
By Robert Peston and Mary Fagan (Filed: 09/11/2003)
http://www.money.telegraph.co.uk/money/main.jhtml?xml=/money/2003/11/09/cnvod09.xml&menuId=242&a...
Vodafone has placed orders for millions of next generation mobile phones for its new 3G services with Japanese manufacturers, in a snub to Nokia, the world's biggest mobile manufacturer.
According to a senior Vodafone executive, Nokia did not yet have handheld devices with the functions he wanted. "Nokia is developing an elaborate system," he said. "But they are behind the Japanese."
He would not name the Japanese recipients of the orders, claiming commercial sensitivity. However, he said substantial purchases had been arranged, on the expectation that mass market sales would take off next autumn.
Vodafone is planning to roll out its 3G services next year. It believes that after years of planning and billions of pounds in expenditure, it now has a winning formula for them. The new phones will effectively combine a camcorder, an MP3 music player and a sophisticated gaming device, with the traditional functions of voice telephony and text messaging.
Vodafone is negotiating deals with music companies to provide a vast library of online music available for download - at a price - by its customers.
Network operators like Vodafone are keen to wrest power in the mobile market away from the handset manufacturers, among which Nokia is the king. Until now, most people buying a new phone have been more interested in the name of the manufacturer than the identity of the service provider.
Vodafone raised eyebrows last year when it chose Sharp of Japan, then an also-ran in the European handset stakes, as the mainstay of its Vodafone Live! service, which it sees as a forerunner to its future 3G service.
As a sign of Nokia's waning market power, earlier this year Vodafone relocated its head of global purchasing, Bob Collymore, to Japan.
Vodafone has also forged an alliance with Microsoft (which hopes to become an important player in the nascent market for "smart" devices) to link mobile data services to personal computers. The deal was seen as a boost to Microsoft's drive to topple Nokia from its pivotal position in mobile telephony.
Also interesting from another board, a post by BRational on the Motley Fool Qualcomm board at http://boards.fool.com/Message.asp?mid=18985012
Eric's post showing relative stock price performance for five selected wireless technology companies (http://boards.fool.com/Message.asp?mid=18954780 and http://boards.fool.com/Message.asp?mid=18961163 ) stimulated my interest to revisit the IDCC story and web site, which I have not been to in the past year and a half or so. I have had IDCC on my curiosity-watch list for several years, but had not followed them too closely of late.
The main hypothesis I wanted to explore is whether one should short IDCC; why would its stock price performance appear so far ahead of Qualcomm and Nokia? Are there compelling reasons behind this divergence that we should know about, that could be either positive for IDCC or negative for Qualcomm (or both), or is it an aberration that is only tolerated because of the relatively light share trading volume of IDCC (and would hence eventually bring it back to the other companies' level)? Furthermore, bringing IDCC in line might mean that Qualcomm would rise to the same relative levels, or IDCC would come down—or both.
1. First, to better place the IDCC story in perspective, it would help to recall this company as one that has claimed to be the next Qualcomm for some time, based on its alleged patent position in WCDMA. However, it had at one time a claim on CDMA, but that was resolved in an early settlement with Qualcomm. It has further many patents in TDMA and GSM, though by far its strongest suit historically had been in TDMA, for which it has been aggressively trying to collect back pay from the European handset and infrastructure makers (and also Samsung). A very recent settlement with Sony-Ericsson on TDMA and EDGE has sent hopes up, and has largely fueled the recent run-up in its stock price, though it has yet to conclude similar deals with Nokia and Samsung (see http://www.interdigital.com/press_room_current_news_detail.jsp?releaseId=391536 ). It has visibly aligned itself with the GSM community (partly because Qualcomm effectively shut it out of the CDMA 1X realm in an early settlement between the two companies—but that is not the point of this post), and boasts claims in EDGE especially, as well as in WCDMA. It has been Nokia's “secret weapon” of sorts in WCDMA, as the main source of IDCC's revenue for the past two or three years has been an R&D contract with Nokia.
2. Second, to better appreciate the percentages in Eric's post, it helps to go back to a five-year stock price chart with both IDCC and Qualcomm (I'm sure all of you know how to do this on MSN or here at the Fool's; two things are apparent: (1) Relative to its pre-bubble levels, the appreciation in Qcom's price is still about twice IDCC's; and (2) the difference in levels shown in Eric's table is mostly due to a recent divergence, that started sometime in April, coinciding with the settlement with Sony-Ericsson.
And while we're looking at charts, note that IDCC's average daily volume of traded shares is under 1 million, compared to QCOM's average daily shares traded of about 15 million; this has implications for interpreting what it takes to produce serious price moves.
3. How significant is IDCC's potential royalty stream from its IP rights? Let's examine tow things: (1) the new legal settlement, which will account for a significant fraction of revenues in the coming two years; and (2) the historical performance record for this company. About the first item, from the press release:
The licensed products exclude any product compliant with Third Generation (3G) standards. These agreements resolve a long-standing patent infringement litigation with Ericsson scheduled for trial in May 2003. Ericsson also has granted an option to InterDigital for a Reference Design License and Support Agreement for Ericsson's GSM/GPRS/UMTS platform.
The license agreements with Ericsson and Sony Ericsson establish the financial terms necessary to define the royalty obligations of Nokia Corporation (Nokia) and Samsung Electronics Co. Ltd. (Samsung) on 2G GSM/TDMA and 2.5G GSM/GPRS/TDMA products under their existing patent licensing agreements with ITC.
How much are we talking about? Still from the press release:
ITC expects to receive aggregate payments of approximately $34 million from Ericsson and Sony Ericsson related to sales of terminal and infrastructure products through December 31, 2002. For periods thereafter through 2006, Sony Ericsson will be obligated to pay ITC a royalty on each licensed product sold. In addition, Sony Ericsson will make non-refundable advance royalty payments to ITC in 2003 covering Sony Ericsson's projected sales in 2003 and 2004.
…Under terms of its agreement, Ericsson will pay ITC an annual license fee of $6 million for sales of covered infrastructure equipment for each of the years 2003 through 2006.
This is not a huge amount, but it becomes significant because of apparent implications for how much Nokia and Samsung might have to pay:
….the Company projects that Nokia's royalty obligation for 2002 could be in the range of $100 million to $120 million and Samsung's royalty obligation for 2002 could be in the range of $22 million to $27 million. Further, based on the application of the MFL provision and assumptions noted above, recent market forecasts, and the prepayment of royalties (net of related discounts) consistent with the terms of the Ericsson and Sony Ericsson agreements, the Company projects that 2003 royalty revenue from Nokia could be in the range of $80 million to $90 million, 2003 royalty revenue from Samsung could be in the range of $20 million to $24 million, and the aggregate prepayment of royalties from Nokia and Samsung for 2003 and 2004 could be in the range of $180 million to $220 million.
This is approaching more serious revenues, though I understand that it is not yet a done deal. It can also be noted that the Nokia-Samsung presumed royalty stream is decreasing year on year.
4. To get a quick overview of the company's PR about its business case, I found a recent presentation on the company's website to be useful (http://www.interdigital.com/dis.jsp?dis=9&file=IR_Pres_April_2003.pdf – you need to first click “accept” on the disclaimer). Two remarks: (1) it highlights how huge the recent settlement is for the company; and (2) the whole “future” case is rather generic—about WCDMA and its importance, with no specifics on how its own products or IP might be relevant to the spread of 3G WCDMA.
5. In comparing its business model to Qualcomm's, the only similarity is that both companies have a significant license/royalty component of their revenues (and earnings). In the case of Qualcomm's, the significance of this component has been diminishing relative to the other businesses, especially chipsets (QCT). For example, in the last quarter reporting, only 26% of revenues (but 51% of earnings) came from licensing (QTL). Qualcomm actually introduces and sells real products (chipsets) and recurring services (Omnitracs, and now Brew) in growing markets. On the other hand, IDCC derives most of its revenues from technology development contracts, e.g. to Nokia or to carriers. Its revenues from that segment do not grow as the size of the addressable market grows. Such revenue sources are volatile, and create an overdependence on a single client. Hence the excitement about the Ericsson-Sony deal in that it would mark the possibility of a relatively “stable” stream of revenue—though the preponderance of TDMA and 2.0/2.5 technologies in that deal makes it a relatively short horizon phenomenon.
How do the two companies compare in terms of economic and financial clout: No comparison, actually. From IDCC's Q4 2002 earnings report, at:
http://205.216.251.105/press_room_current_news_detail.jsp?releaseId=391309&cb=1047906311476
For the full year 2002, the Company reported revised revenue, net income and earnings per share of $87.9 million, $2.4 million, and $0.04 per share (diluted), respectively.
Qualcomm followers undoubtedly know that IDCC's total annual revenues (approx $88 million) are less than one third of the quarterly revenues of the QTL division alone (approx $266 million this past quarter). For QCOM, GAAP reported revenues for fiscal 2002 were $3.0 billion (13 percent increase) in fiscal 2002. GAAP reported earnings were $360 million or $0.44 per share in fiscal 2002.
This information is summarized below:
IDCC QCOM
Annual Revenues (in Million $) 88 3,000
Earnings (in Million $) 2.4 360
Earnings per share ($) 0.04 0.44
Price per share (Apr. 30, '03) 22.53 31.88
Of course, “valuation” is a game fraught with many subtleties, not the least of which is that the above GAAP numbers may not be the most relevant for evaluating a company's operational performance and future prospects. But when I take the above numbers together with the recent behavior of the respective share prices, and with the composition of the revenue streams and how they are likely to evolve, I conclude that either IDCC has gotten ahead of itself and of (its best case) “comparables”, or that QCOM is way below where it should be, or both. My conclusion would be that this seems like a good time to sell one and buy the other—there is even a nice gap between 14 and 17 in IDCC's recent climb (http://www.siliconinvestor.com/research/chart.gsp?s=idcc ).
BRational
PS: Disclaimer—this is only a superficial comparison of the two companies; I am not credentialed nor qualified to make investment recommendations. Do your own research, or consult professional analysts (but only if they have received a seal of approval from Lokicious).
OT: Thanks Once
Baz
OT: Hi, could someone e-mail me a copy of the HL report to bazmcdaz@hotmail.com
......anyone....?
OT: Hi, could someone e-mail me a copy of the HL report to bazmcdaz@hotmail.com
Many thanks,
Baz