What the article didn't say
Howard Goldberg wants every cell phone to use InterDigital's chip technology.
More to the point, he wants IDCC to be paid for every phone that does use IDCC's technology.
But rather than earn cheers or envy for its research prowess, Goldberg's company has earned enmity for its hardball enforcement of intellectual property rights.
So has Qualcomm, but they won in court so they are getting paid even if they aren't loved. IDCC tried being the nice guy, go along to get along. They got lovely Christmas cards but no checks. Now they want the checks. They're not in business to earn cheers, they want to earn profits. I'd say the handset makers have earned enmity for there unwillingness to pay for the IP they are using.
It has generated free cash in only three years since 1988.
While an interesting bit of trivia, the more relevant point is that IDCC has a boat load of cash right now, miniscule debt, and a future cash flow that should be strong to phenomenal.
But Wall Street loves this outfit.
I wish.
Given that a mystery company--Qualcomm says it's not the one--will now protect companies from InterDigital's litigiousness, that eliminates much of the fear of shunning Goldberg.
This is one point I do agree is a concern. As long as someone is indemnifying other companies, why would they sign? I always felt QCOM was the only one that made sense, but a comment later in the article gave me another idea.
Ordinarily, because it's nonrecurring, money from legal settlements is recorded not as ongoing revenue but as "other income," says Charles Mulford, an accounting expert at the Georgia Institute of Technology.
These settlements are to get paid for normal operations, not some extraordinary, one time event. By booking revenues as other income just because we had to take legal action to get paid makes no sense. It is the character of the income that is important to investors, not the method of collection. Otherwise our normal operating income is never shown in any period as recurring earnings, which would be truly misleading.
The company says accounting rules allow for such treatment.
So does our auditor. So does GAAP. If she knows of someone who says otherwise, why doesn't she state that? No, instead she puts it in a way to lead others to think that only IDCC thinks and does this.
No cash actually came in until a $7.8 million payment in the second quarter, with another $7.8 million due by the end of the year.
Now she is insidiously portraying IDCC's use of accrual accounting (as properly required by GAAP) as being somehow underhanded.
In any case, InterDigital may see its $33 million in profit for the first nine months nearly vanish because its insurer, Federal Insurance, is demanding a big $28 million cut of the Ericsson-Sony settlement to reimburse it for attorneys' fees it covered. This fight is now headed for arbitration.
No, it won't. Even if IDCC were to completely lose, it will not happen until next year, so it won't affect 2003 income.
For now InterDigital has another fight on its hands. Four handset manufacturers--Nokia, Siemens, NTT Docomo and Ericsson--are sick of patent disputes and have jointly agreed to cap royalty rates on patents for a burgeoning technology known as wideband code-division multiple-access. The consortium has suggested the rate be set at around 5% of a handset's costs.
She should say "are sick of paying for IP and have decided to collude to minimize there costs at the expense of companies outside of their club."
"We want to keep it as low as possible, to prevent some companies from just making money with their patents, as does InterDigital or Qualcomm," says Siemens' spokesman Florian Kreutz.
What is this, bizarro world? A purchaser states that they want to limit what they pay for a necessary component because they don't like the business model of the supplier. This gets quoted in a national financial publication as though it makes sense?? And then people wonder why IDCC is so litigious! When faced with an attitude like that, what else can you do? You either sue or decide to be a charitable organization that does all this work for the betterment of mankind and just relies on the generosity of the manufacturers to keep the doors open.
I've just seen the light on the possible indemnifier. It might be the consortium. They know that if IDCC can license others it will help validate IDCC's IP if legal action is taken against them. So by indemnifying the little guys they put the lid on 3G licensing and put the pressure on IDCC. They all hold out and negotiate as one unit. Either cave in on the rate or none of us sign. If that's what's happening, then I hope IDCC goes to court next week to sue for 3G infringement. I want IDCC to be a tax collector. No one likes a tax collector but that's because the tax collector has to be paid. Companies are not going to pay IDCC unless they are compelled to do so. The time for playing nice is at an end. Who do you think brought IDCC and this slant to Forbes? Let's find a favorable jurisdiction and file NOW. If it is the consortium might we be looking at anti-trust issues as well.
