InterDigital Inc (IDCC)

[The Count]

Background info on IDCC

Here's a link to a recent report by analyst Tom Carpenter.
http://wirelessledger.com/idcc_sam_raise_to_buy.doc

He has a good understanding of IDCC. He has followed it for years. Read through it and pay close attention to the recent contract with Samsung that pushed his estimated EPS for 2009 over $2 per share and the discussion of expectations from Nokia that push the 2010 EPS to over $3 per share. This will give you a good overview of IDCC as an investment. Note that IDCC has $57 million a year of prepaid revenues for 2009 and 2010 from LG and $100 million a year from Samsung for 2009-2012. These amounts are guaranteed income.

Most here, including me, think that Mr. Carpenter is being conservative in his expectations for earnings and for the multiple. I will be disappointed if 2010 does not exceed $3.50 a share and I expect that IDCC should be able to command a multiple of 18-20. In addition IDCC has over $6 share in cash, no debt other than the mortgage on its building, and another $6 per share in cash coming from the Samsung contract over the next 17 months. Other revenues from per unit licensees should cover the operating expenses. Mr. Carpenter has since downgraded IDCC from buy to neutral, which IMO is due to the $6 run up in the share price from the 27s to the 33s in the weeks after his recommendation.

Is this a good time to buy IDCC? Long term, absolutely IMO. Short term it may be choppy as the next big issue is Nokia, which has roughly twice the market share of Samsung and 4 times LG. Based on past history, this will go down to the August decision date, at which point there will be a settlement IMO. IDCC also is working on signing Sony-Ericsson and Motorola, which are have market shares similar to LG. When any of this happens I would expect the share price to permanently move higher. The wonderful thing about IDCC's business model is that when they sign new licenses, the revenue drop right to the bottom line, with only taxes as an incremental expense.

This board is populated with many investors that have followed IDCC for years and decades. There is an assumed knowledge base in most of the discussions that can leave a newbie out in the cold. If you do invest in IDCC, this board is an invaluable resource. There are industry insiders that understand the technology and the market, lawyers that follow the cases and provide insights, accountants to analyze the numbers, wall street professionals that look at the markets and institutional activity and those that bring news to this board almost instantly and never later than what gets to the investment community at large. The "high" PE is based on past earnings. Only those who take the time to look at the future and realize what the earnings will be understand what a value IDCC is at these levels. Once the revenues are reported then those investors are going to see a company with strong, growing revenues, stable costs, huge cash reserves (or the benefit of the use of that cash, whether it be acquisition of complimentary IP, additional buybacks of shares reducing the float, dividends or product development), and no debt, and they will discover IDCC and it will reach its full value.

Do your DD and take a good, hard look at our little gem here. I think it will be a good addition to your long term portfolio.