Revised compelling reasons for owning IDCC stock
DannyD you are correct in that technology is not the only reason why I continue to own IDCC stock. Made me rethink and revise all my compelling reasons for owning IDCC as follows:
Fourteen Compelling Reasons for Owning IDCC Stock Revised
1. IDCC has “essential” and “commercially important” patents in all modes of the 3G standards including DECT, EDGE (IS-136), CDMA2000, WCDMA-FDD, WCDMA-TDD, and TD-SCDMA. Any company that makes a 3G compliant phone/device should owe royalty to IDCC. This fact has been reiterated in quarterly conference calls and the annual reports.
2. InterDigital also has essential IPR in additional wireless standards, other than 3G, including 2G (GSM, TDMA, TETRA, PDC/PHS, CDMAOne/IS-95), 2.5G (GPRS, EDGE, CDMA2000 1X), 802.16, and possibly 802.11.
3. The Phase 2 part of the Nokia partnership began on Jan. 1, 2002. Phase 2 will eventually involve ongoing/recurring royalties payments to IDCC on all handsets/devices and infrastructure sold by Nokia, the world’s leading wireless phone manufacturer (over 35% market share), and also a leader in wireless infrastructure equipment. The finalized royalty rate for 2G/2.5G GSM/GPRS and other TDMA-based standards will be based upon the royalty framework established in the recent Ericy license. IDCC has publicly estimated Nokia’s royalty for these standards alone to be $100m to $120m for 2002, and $80m to $90m per year for 2003 and 2004. These projected amounts to not include a yet to be determined 3G rate or 2G/2.5G CDMA rate from Nokia for these other standards, which they have already licensed.
4. Samsung is licensed for 2G/2.5G TDMA-based standards and will probably pay whatever the finalized royalty rate that Nokia pays by virtue of their MFL clause effective back to Jan. 1, 2002. IDCC has publicly estimated that this could amount to $22m to $27m for 2002, and $20m to $24m per year for 2003 and 2004. These amounts do not include a possible future 3G contract or a 2G/2.5G CDMA license.
5. Ericsson litigation is finally resolved. Ericy agreed to a $34m settlement for prior usage of 2G/2.5G TDMA-based standards through 2002. Ericy also agreed to pay $6m per year for the next four years for 2G/2.5G TDMA-based infrastructure. Ericy/Sony paid a $26m two-year advance for 2G/2.5G TDMA-based handsets. These amounts do not include a possible future 3G contract or a 2G/2.5G CDMA license.
6. Almost $100 million in cash (about $2 per share) at 3/31/03, virtually no debt, and significantly increased the engineering staff since 2000. IDCC has publicly stated that they expect to receive between $360m to $430m of additional cash within the next 12 months from Nokia, Samsung, and Ericy.
7. More 3G contracts should be following Matsushita with their $19.5 million advance royalty, and Sharp with their $11 million advance fairly soon. NEC with their $19.5 million royalty advance, Japan Radio, Tantivy, and Hop-On all signed 3G licenses in 2002. NEC settled the arbitration dispute over past 2G royalties for $53 million, and in addition to the settlement amount, signed a new 3G contract with a royalty advance of $19.5 million.
8. More 2G licensing momentum should be following the Ericy resolution in 2003 led by Ericy/Sony with their $26m 2G advance. Many other 2G infringers should be licensing with IDCC fairly soon. The triggers for signing these other companies will be the Ericy 2G resolution, the NEC 2G settlement, and/or the need for 3G licenses.
9. Recurring royalties are improving dramatically. The year 2002 marked the first time in which IDCC recorded earned revenue from some of the 3G prepaid advance royalties, in addition to having a significant increase in 2G recurring royalties. The Ericy resolution in 2003 has already produced another 2G ongoing revenue stream of approximately $4m to $5m per quarter. Rate finalizations for 2G with Nokia and Samsung should generate at least $25m per quarter in additional ongoing revenue streams beginning in 2003 according to IDCC’s public projections.
10. Unprecedented 10 year chip agreement with Infineon, a world leader in wireless chips. IDCC and Infineon expect to complete the full multi-mode 3G FDD protocol stack no later than the first quarter of 2004. The dual-mode 2G GSM/GPRS and 3G FDD chip should be ready for the commercial market in 2004. IDCC is also developing several other TDD-based products for the emerging 3G market.
11. The WTDD mode, used in conjunction with FDD, is most likely to be the dominant 3G technology according to most industry experts and wireless companies. The benefits of WTDD include superior asymmetrical data-handling capabilities, spectrum efficiencies of 20% - 35% that will significantly allow for more system users, and more/richer 3G applications at lower incremental costs. IDCC owns substantial essential IPR in WCDMA and has partnered with Nokia and Infineon to further develop this technology
12. IDCC is very actively involved in various worldwide organizations, such as, the UMTS Forum, the GSM Association, the TD-SCDMA Forum, and the TDD Coalition, which promote and inform the wireless industry. These organizations are composed of the leading equipment manufacturers, chip producers, telecom operators, software developers, wireless IPR owners, and other interested suppliers and parties. This active involvement further enhances IDCC’s growing reputation as a leading company within, and a major supplier of enabling technologies to the wireless industry.
13. Institutional ownership in IDCC has recently increased significantly from under 20% to over 30%. Several more analysts are now participating in IDCC’s recent conference calls, which should translate into increased analyst and media coverage in the future.
14. IDCC is strategically positioned within an explosive industry, which is projected to generate astronomical future revenues, and offers superior value over its competitors.
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