InterDigital Inc (IDCC)

[Dave Davis]

PHILADELPHIA -- Shares of InterDigital Communications Corp. (IDCC) rocketed more than 40% to a 52-week high Monday after the wireless communications technology company announced it had settled a long-running patent dispute with Swedish cellular-phone giant L.M. Ericsson Telephone Co. (ERICY).

The settlement, which will bring millions of dollars in licensing fees and royalties to InterDigital , is expected to lead the King of Prussia, Pa., company to similar arrangements with other mobile-phone makers.

Ericsson and spinoff joint venture Sony Ericsson will pay an InterDigital subsidiary $58 million combined for its mobile-phone technology under the settlement, and Sony Ericsson will also pay royalties for the next four years based on number of handsets sold.

InterDigital , in return, is dropping a decade-old patent-infringement case against Ericsson that had been scheduled to go to trial in May.

InterDigital said in a release that the license agreements with Ericsson and Sony Ericsson will help establish the royalty obligations of Nokia Corp. (NOK) and Samsung. Those two companies could owe the InterDigital subsidiary $180 million to $220 million combined for 2003 and 2004, InterDigital said.

Nokia and Samsung would still owe further payments for another two years, according to InterDigital .

"Getting Ericsson done absolutely gets the ball rolling on the other two," Investec Inc. analyst Scot Robertson said. The settlement recognizes that InterDigital's technology is an essential part of the standard for wireless communications and that the company should be paid for it, he said.

Settling the legal dispute allows InterDigital to look to a future in which the company can have a predictable revenue stream, based on the number of handsets its licensees sell, Robertson said.

InterDigital shares traded recently at $19.51, up $5.75, or 42%, on volume of 5.3 million, compared with average daily volume of 514,000 shares. Earlier the stock reached $19.69, surpassing the previous 52-week high of $19.50 achieved on Nov. 29.

Robertson, who rates the stock a buy, his firm's highest level, called the stock movement "absolutely appropriate." The stock should have been valued this high in anticipation of the settlement, he said. "I think the stock is worth much more than this."

The analyst has a 12-month price target of $25 on the stock. Robertson doesn't own InterDigital shares. He said Investec has performed investment-banking services for the company in the past 12 months.

Ericsson shares traded recently at $7.29, up 87 cents, or 14%, on volume of 6.3 million, compared with average daily volume of 3.4 million shares.

-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; [e-mail]

Updated March 17, 2003 1:38 p.m.