InterDigital Inc (IDCC)

[littleinvestor]

Jeffree,

Although the consensus on the board seems to be that the Apple deal was a "fixed price" deal that yielded only small direct contributions to IDCC's revenues, I am convinced that it was a "hybrid" deal yielding fixed income for a short term (e.g. for the 2G period of sales plus a component for future handset models that Apple might bring to market (i.e. 3G).

Based on the response that Bill Merritt gave to Tom Carpenter when he questioned him about the California company (see citation below), I think the license agreement included royalty bearing clauses for 3G and that the $105 million prepayment coincides with Apple's closing of a new deal in China. Prior to this, IDCC couldn't have included this portion of future Apple sales because it wasn't certain enough, so it is new money!

http://seekingalpha.com/article/152211-interdigital-inc-q2-2009-earnings-call-transcript?source=bnet

Tom Carpenter - Hilliard Lyons

If you do fixed price, you think there might be, maybe every two years reset, if you don’t have a case and what would that through company out California that’s done extremely well, has a fixed price dealing, and you are going to walk into that for seven years?

Bill Merritt

There are definitely provisions you can put into the (inaudible) and both side can put in, that provide some market adjustments and I think -- again it depends upon the term of the deal. The sorter the term, the less you concern because there is not much that can happen. They usually have pretty good visibility for a year or two beyond that. Longer term, you can have reset provisions, or you can create hybrid models.

That could be a hybrid model where it’s partially fixed, partially variable, so that and thus in that situation you are protected to some degree, if the volumes take off because you at least have eight running royalty component but that licensee, because that running royalty component would be smaller because of the fixed component they get a benefit if they sell more. So, looking at things going forward is I think it may not be running versus fixed versus some hybrid of that.