March 19, 2010
Hilliard Lyons Equity Research 3 Technology
million-$200 million of its cash position to obtain a large number of Nortel’s patents. In turn, InterDigital
would try to increase its 4G royalty rate above what the firm realized for 3G. Please contact us directly if
you would like to discuss our valuation methodology on Nortel’s 4G patents.
Goodbye Poison Pill, Hello Private Equity?
The Board of Directors eliminated InterDigital’s shareholder rights plan, aka “poison pill.” We caution
investors not to read the move as the company being “in play”, but as a more shareholder friendly
leadership style under new Chairman of the Board Terry Clontz. Given that InterDigital has almost 50%
of its market capitalization in cash, we believe it was prudent for the board to remove the poison pill.
This lets private equity firms or technology firms seeking to reduce exposure to patent lawsuits know that
the Board of Directors would consider proposals if the right offer comes along. Given increasing
litigation in the wireless industry - Apple/Nokia, Apple/HTC, Motorola/Research in Motion, and many
others, we believe this increases the value of InterDigital’s thousands of 2G, 3G, 4G, and 802.xx patents.
IDCC’s business model, which sometimes entails legal action and long time frames to resolve licensing
disputes, may be easier to run privately. This way, other companies can’t use negative media stories to
negotiate with InterDigital, and licensing agreements remain confidential – no press releases, 8-K
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