InterDigital Inc (IDCC)

[The Count]

Passing on the cost

Gary and others, I understand the mindset that if someone is going to buy a phone for $186, they would still buy it for $188. However when the manufacturers price their product, they don't sit down and say
"Here are our costs, here is the profit we want, so we will price it at the combination of those two."
Is IDCC basing their request for royalty rates based on their investment in the IP, or is it based on what they believe it is worth and what they can get in the marketplace?

Manufacturers sell it for what they can get. They work very hard to maximize revenues based on what the market will bear. Cost will provide a floor for selling price, and if they cannot generate sufficient revenue to meet and exceed that floor, then they will exit the market. Therefore the amount they pay for IP impacts their bottom line. However, to be fair, if all manufacturers have to incur the same cost they will not be at a competitive disadvantage in regards to that cost, but the overall demand will be slightly less at the slightly higher price.