InterDigital Inc (IDCC)

[0nceinalifetime]

Mschere, I agree, the first quarter IDCC earnings are probably going to look really good, not nearly as good as you imply but really good nonetheless:

"Qualcomm earned $103 Million for its current quarter..The market values this earning power at some $24 Billion..IDCC will earn IMO: a similar amount for its first Quarter and the market currently values this earning power at $1.2 Billion."

The problem is that IDCC's revenues are extremely 'lumpy' quarter to quarter and it doesn't take a financial analyst to see that revenues for the year will be front-loaded into the first quarter and, if I'm not mistaken, there will be considerable revenue recognized from past quarters as well.

What this does to the stock price is anyone's guess but it won't be viewed in the same quality vein as Qualcomm's earnings which are much more predictable, less lumpy and of a more secure nature due to the high proportion of recurring revenue to license fee royalties.

IDCC needs to develop a steady stream of recurring royalties that are not going to dry up when the world transitions to 3G. Right now IDCC's license agreements don't even cover 2G handsets if that 2G handset also contains 3G functionality. That's just plain weak in my book.

Unless and until IDCC signs up the major manufacturers for 3G and 2G/3G their existing 2G royalties will not be valued very highly by the street since they will dry up as dual-mode becomes the norm. And right now those agreements are looking mighty slippery.

Once