Buy rating reiterated today! J.J.B. Hilliard, W.L. Lyons, Inc. · Member NYSE and SIPC . Tom Carpenter Rating: BUY Senior Technology Analyst Suitability: 4 February 10, 2003 Technology InterDigital Communications Corp (IDCC-NASDAQ) 4Q02 Revenue Upside Likely; Added to Focus List; Reiterate Buy Rating Company Description: InterDigital designs and develops technology content and systems solutions for advanced digital wireless communications applications. The company licenses 2G CDMA and TDMA technology to wireless communications firms, and is beginning to license 3G technology as well. We believe InterDigital will report 4Q02 earnings that will surpass its $12.7 million guidance as well as our $15.5 million estimate. Strong camera phone shipments from leading licensee Sharp, should contribute to several million dollars of upside, in our opinion. Our analysis indicates that Sharp has increased its market share in Japan over the past six months on the strength of its camera phones and has also gained a beachhead in Europe, which is a new market for the firm. One of InterDigital's key licensees, Sharp, reported December 2002 results that should bode well for InterDigital. We believe Sharp shipped approximately 1.8 million phones in the quarter vs. our 1.6 million estimate and IDCC's forecast of only 1.1-1.2 million phones from Sharp (note, we “backed out” this number from IDCC’s revenue forecast). Although we do not expect any material incremental news on the Ericsson litigation, we would like to see management clarify a reason for the trial delay from February 10, 2003 to May 15, 2003. We would also like to hear about any progress on a finalization of a royalty rate with Nokia and Samsung, the timing of any Matsushita (Panasonic) revenue recognition in 2003, and if we should expect announced additional licensee announcements in 1H03. Our published estimate for 4Q02 is $15.5 million in revenue and a loss of $0.10 per share. We would not be surprised if IDCC posts revenue of $17.0 million to $20.0 million and near-breakeven EPS results. We reiterate our BUY rating and $22 price target which is based on a ten-year discounted cash flow analysis.
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