InterDigital Inc (IDCC)

[rmarchma]

Jim re the Apple license and possible increase thereto

I don't want to give anyone false hopes about a possible increase in Apple's fixed fee amount, but I think there is a possibility that it might have happened in the second quarter of 2010. From a repost of mine at the end of October following the release of the third quarter 10Q as follows:

rmarchma Share Saturday, October 30, 2010 8:02:45 AM
Re: rmarchma post# 297980 Post # of 308735

Could increase in fixed-fee revenues be Apple

From the latest 10Q as follows:

...."The increase in fixed fee amortized royalty revenue was driven by a full quarter of revenue from our September 2009 patent license agreement with Pantech, compared to a partial quarter of revenue in third quarter 2009, and our second quarter 2010 amendment to our patent license agreement with an existing customer."

Excerpt from my referenced post as follows:

...."(5) Quarterly fixed-fee revenues of $49.6m have increased from previous quarters. Fixed-fees were $48.1m in the last quarter of 2009 and the first quarter of 2010, and $48.6m last quarter. Evidently there is a new fixed-fee licensee that has not yet been disclosed by IDCC, or an existing licensee's fixed-fees got increased, which would be unusual and unique."

This is the first time to my knowlege that an existing IDCC fixed-fee contract got amended and the fixed royalty fee increased. This explains the unidentified $.5m increase in the second quarter 2010 for a partial quarter, and a total $1.5m increase for a full third quarter ($49.6m total current fixed fee - $48.1m base fixed fee first quarter 2010).

Now as to the possible identity of this existing fixed-fee licensee who amended and got increased by $1.5m per quarter, I think it's a good chance this could be Apple. I doubt it is Samsung, who is a fairly recent licensee. I doubt it is LG whose license comes up for renewal on Jan. 1. LG had a threshold provision, but that was in the existing contract, ie the license would not need to be "amended". I don't think it is Pantech, whose license already includes LTE. (BTW one possible way an existing fixed fee license might be amended is to include an additional standard, such as LTE, that is not part of the original fixed-fee license).

I seriously doubt that the amended fixed-fee license is with Lucent, whose license expires at the end of this quarter. If it were Lucent, it would be a license "renewal" rather than a license "amendment". It can't be Kyocera, who renewed its license as a per-unit license rather than a fixed-fee license. That only leaves two more possibilities: Apple and the previously unidentified fixed-fee licensee.

The unidentified fixed-fee licensee was an existing per-unit licensee, who switched to a combination fixed-fee and per-unit license in the third quarter of 2008. The name of this particular licensee was never identified by IDCC. The fixed-fee part of this unidentified licensee is $1.4 per quarter. I can't rule out this particular licensee, as they may have amended their license a second time to drop the per-unit portion and go exclusively fixed-fee. If so, it would increase this unidentified fixed-fee licensee to $2.9m per quarter.

The other viable possibility is that Apple amended its fixed-fee license from $2.1m per quarter to $3.6m per quarter. They might have added LTE to the existing license, or there may have been some other provision in the license that triggered an amendment. As everyone knows, I have battled many posters over this Apple license being fixed-fee at only $2.1m per quarter for a long time. Now I will be one of the first to admit that finally at last the Apple license MIGHT currently be more than the initial fixed-fee amount.


A recap of fixed-fee licensees and fixed amounts per licensee:

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=54801956