grither, you have to remember the settlement also resolves the 2g issue where we have a unanimous arbitration award and court verdicts confirming the award which will amount to $200 million when you add in the 2006 sales that were not in the original calculation. So when I stated a settlement of $500 million it takes this amount into account and I don't think the stock will move any higher from here and will probably go down. Remember whatever Sammy pays, Nokia is already paid up on 2g so the 3g rate better be decent or you can discount the amount we can expect to receive from Nokia when we settle with them.
You said a deal even half the $500 million I posted and the stock should move positively? You are kidding, right? A deal half that size would mean a total of only $250 million which would mean that we are being paid $50 million for all 3g handsets thru 2012 when you take into consideration the $200 million we are virtually certain to get even without a settlement. If that were to happen you would not see another licensee of IDCC pay another dime IMO. Considering how much NEC, Sharp, LG and others are paying us, we better have settled for much more than $50 million for 3g from Sammy. You would also see the stock down into the teens easily. It would be like no 3g deal at all.
I stand by what I said in my post and if you think about it, $500 million is at the very low end of what we should be getting for 3g when you consider the estimated 700 million phones that Sammy will sell between 2006 and 2012 plus the money owed for 2g.
Remember the Nokia deal? We won an arbitration award of $250 million then we forgave all 3g sales up thru April, 2006, the date of the settlement. Nokia is only obligated to pay for 3g products from April 2006 forward with no more money coming for 2g. Now we have another arbitration award for $200 million and if we do the same that will mean that Sammy owes us the $200 million plus royalties on handsets from April 2006 thru 2012, the date the contract ends. The deal needs to spell out precisely how much is for 2g and how much is for 3g so when Nokia requests the contract during the ITC investigation, it is clear what we are getting and what is FRAND for 3g. I know we will never see it but hopefully they have learned their lessons and that is the reason for the 45 day delay.
Message In Reply To:
Thank you for your calculations. Probably accurate in regard to number of phones sold and rates per phone. But I would like to add my opinion to balance some of the thoughts of many on this board. You said:
"My guess is anything around $500 million and the stock stays around where it is at or drops a little since that will be the low end of what would be expected. Higher than that and we should move higher; IMO depending on how much higher the settlement is than my low end guess of $500 million, will determine how much higher we go."
What? A settlement of $500 million- THE LARGEST DEAL IN THE COMPANY'S HISTORY- and the stock will stay flat or fall??
I think the stock should jump on a deal half that size. Samsung is settled and the stock should be positively motivated on a deal of any size. We are not talking about resetting the value of a current deal. THIS IS A NEW DEAL. If Samsung pays $0.40- $0.50 per phone (and I think it will be much more), that will still be $100's of millions that drop right to the bottom line of this profitable company with lots of cash and no debt.
I think even if the Samsung deal is less than $1 per phone it will still create a situation that is vey positive for IDCC.
Cautions:
1. Even your numbers for phone sales assume much growth.
2. IMO, IDCC did not go into the ITC decision from a postion of strength. The ITC staff attorney sided with Samsung. And even if he hadn't IDCC had much more to lose. Samsung risked paying the full rate and obligation they were assumed to already owe. IDCC risked payment on all future contracts.
3. IDCC would not settle and get they rate they started negotiation with. Settlement is about compromise.
4. No one from IDCC or Samsung is going to tell us what the rate per phone is. Only if a deal like LG is done will we know the full cost to Samsung. Most likely I think we will still be debating the possible rate even after we get a full settlement announcement.
AI
