A great summation of IDCC today
B&S has IDCC one of the top ideas for 2008.
InterDigital Inc. (IDCC, Market Outperform, $30 Target)
InterDigital Inc. designs, develops, and licenses digital wireless technologies which are
incorporated into mobile handsets, semiconductors, and other wireless equipment. The
company is leveraged to the mobile handset market, more specifically the 3G subset of that
market. The global 3G market is expected to grow at a 17% CAGR through 2012 and by
owning key patents related to this technology InterDigital stands to see its royalty revenues
grow substantially in the coming periods. The company closed 2007 by licensing deals with
Apple, Inc. and Research in Motion and also received favorable court rulings against Samsung
in the District Court of NY and against Nokia in the English High Court. The company
appears to have carried this momentum into 2008 by expanding its relationship with SK
Telecom and announcing another 3G licensing deal with Giant Electronics, Ltd. While major
licensing deals with companies like Nokia, Sony Ericsson, Samsung, and Motorola remain
elusive we believe the pendulum could now be starting to swing in favor InterDigital. All data
points over the past few months have been positive for InterDigital and we believe that augurs
well for the company in its upcoming ITC case against Nokia and Samsung. In our opinion
the company’s technology has been legitimized and it is only a matter of time before the more
lucrative 3G deals are inked. The company is currently executing on a $100m share buyback
and we believe shares of InterDigital are undervalued and do not fully reflect the upside
present in the business model. We would point out that a deal with one of the remaining
unlicensed top handset OEMs (i.e. Nokia, Sony Ericsson, Samsung, or Motorola) would
increase the company’s valuation beyond our $30 target by a substantial margin.
Accurate, succinct summation of the last six months and realistic look at the next year. Puts my growing confidence and excitement about IDCC into well chosen words.
