InterDigital Inc (IDCC)

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InterDigital Up on Licensing Deal with LG Electronics
01/24/06

With the recent licensing announcement of cell phone maker LG Electronics InterDigital has drastically increased its financial outlook overnight. Here's the snippet from the 8K filed witht he SEC 01/23/06.

On January 18, 2006, InterDigital Communications Corporation's patent holding subsidiaries (collectively, InterDigital) entered into a worldwide, non-transferable, non-exclusive, patent license agreement with LG Electronics Inc. (LG). The five-year patent license agreement, effective January 1, 2006, covers the sale, both prior to January 1, 2006 and during the five-year term, of terminal units compliant with all TDMA-based Second Generation (2G) standards (including TIA-136, GSM, GPRS, and EDGE) and all Third Generation (3G) standards (including WCDMA, TD-SCDMA and cdma2000(R) technology and its extensions), and infrastructure compliant with cdma2000(R) technology and its extensions up to a limited threshold amount, under all patents owned by InterDigital prior to and during the term of the license. Under the terms of the patent license agreement, LG is obligated to pay InterDigital three equal installments of $95 million, in the first quarters of 2006, 2007, and 2008, respectively. At the end of the five year term, LG will receive a paid-up license to sell single-mode GSM/GPRS/EDGE terminal units under the patents included under the license.

Although this licensing news may look like a huge surprise in the market, it is consistent with our long term view of the powerful patent licensing potential of InterDigital.

We remain optimistic on shares of IDCC and beleive this licensing deal is a significant milestone given the recent move by China to adopt TD-SCDMA.

We will comment more on IDCC in the weekly report but for recollection and new subscibers in particular we refer you to a past report as a substantial backgrounder on the company: The 2.5/3G Licensing of Interdigital

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