Sunday, July 24, 2005 11:33:32 AM
The Nokia award was mildly positive. I think it fell within the range of expectations, so was largely priced in to the stock. It did eliminate much of the risk in IDCC which would tend to boost the share price. However Nokia's position of fighting this and dragging it out by every means possible has put us right back to where we were for generating recurring revenues, which is waiting, waiting, waiting.
If Nokia had accepted the arbitration result, then IDCC could settle with Samsung under the MFL and gone after the other 2G holdouts, generating significant cash flow and some 2005 and 2006 recurring revenues. Additionally having the trigger issue decided could give some comfort to potential 3G licensees that Nokia would have to pay royalties under the same fee structure, so they would not be put at a competitive disadvantage. Nokia's fighting this just puts all that on hold. So the price is back to the pre-arbitration levels because there is no impetus for anyone to license with IDCC. There is very limited downside for delay for the licensees. Maybe miss out on the prepayment discount, but as we found with 2G, once the amounts get big and old, compromise somehow becomes expected. So not only do the obstinate bastards get to pay later, they get to pay less. This hurts IDCC even more because visible, growing recurring income get valued at multiples, while lump sum payments don't. So even if we were to get 20% more years down the road, the stock price would be lower the whole time, and it would take a while after getting the award to get properly valued because the street wants to see actual consistent results.
We are priced at $17 not because of disappointment or uncertainty about the arbitration result, but because people are seeing 3G turning into what we had for 2G. Fighting to collect, ending up getting paid years late and hundreds of millions short. Nokia is going to fight this every way they can. They are almost certainly supported by all the other manufacturers, including that ethical corporate citizen, ERICY. It is in their mutual interest. As much as they may be competitors, they aren't going to cut off their noses to spite their face. Nokia is absolutely going to continue with their challenge to the award. The good news is that the street knows this and it will not cause any significant change to the price. However the time playing nice is over for IDCC.
We have cash - it is time to use it to enforce our patents. Sue companies in jurisdictions around the world. Pick favorable venues and the weakest defendant. Sue different companies in different countries so they all have to start from scratch. Get some wins and then use that precedent to pursue others. The present strategy is clearly not working - we are not getting licenses and there is no reason for anyone to sign. There are no consequences to delay for anyone except IDCC. We need to force the issue now. Court action will take years, so the time for waiting is long past. We need Uncle Billy to get up, go to the window and yell "I'm as mad as hell and I ain't going to take it anymore" and then have his consigliere go make these manufacturers an offer they can't refuse. Does Jorma have a horse?
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