InterDigital Inc (IDCC)

[mschere]

From a RMARCHMA reply to a previous question that I had regarding Ericsson/Sony recurring revenue being recognized in IDCC's first quarter..IMO: IF Nokia and Samsung agree to IDCC's evaluation of their contractural agreement..prior to the Company reporting their first quarter results..IDCC may well recognize about an extra $25 Million in recurring revenue for its first quarter.



The big question that you are raising is what about the 2003 2G handset royalty from Ericy/Sony. This required advance for 2003/2004 will not be paid until the second and third quarters, but should IDCC go ahead and accrue one quarter of estimated earned royalty from the anticipated advance in the first quarter of 2003 is a very interesting question. This estimate would be one eighth of IDCC’s previously stated projections of $20m to $25m for the 2003/2004 two-year period for Ericy/Sony, or $2.5m to $3m per quarter. When the advance is actually received any amount that pertains to future quarters in 2003 and 2004 will be deferred, but that doesn’t answer the question about the earned royalty for first quarter of 2003.

I think it all gets back to the last quoted sentence in the 10K above re Nokia and Samsung. IDCC clearly states that they will not accrue any royalty from Nokia and Samsung “until all elements required for revenue recognition are met”. I now take this to mean that IDCC must receive a signed royalty rate agreement specifying finalized rates from Nokia and Samsung before they will accrue. However, Ericy /Sony is different in that the royalty rate is finalized, and the obligation is definite and required. The only thing missing might be an actual sales report of covered handsets from Ericy/Sony for the first quarter. But to me this is not a critical revenue recognition element as this amount can be reasonably estimated. Therefore, there is a good possibility that the $2.5m to $3m 2G estimated handset royalty from Ericy/Sony might very well be accrued and recorded as earned royalty by IDCC in the first quarter. I did not factor this into my earlier first quarter projections.