Sunday morning musings. When two firms are negotiating business deals with as much money involved as we think there might be between Nokia and InterDigital, anything is possible. The "up front" cash here is pretty amazing, but it's really just a drop in the bucket compared to the longer term revenue streams. When Nokia multiplies any "per product" royalty rate by the 100's of millions of products in their business plan, things get VERY intense.
They are looking at the other side of the same set of numbers that we see making InterDigital such a compelling investment IMO. In the coming years we see huge royalty revenue streams and bottom line profits pouring into InterDigital, while they see huge cost projections eating away at their profit margins. Those are very different views of the same numbers, and things like that are never taken lightly, or without making every effort to find the best "solution".
It's pretty clear that InterDigital's management thought that the terms of the Ericsson settlement fully met at least the 2G "rate trigger" contract provisions in the Nokia agreement, and that it was simply a matter of "filling in the blanks". Now we see Nokia taking steps to continue the negotiations about something, and we have no way of knowing exactly what, in their business relationship with InterDigital.
What I'm trying to say is that IMO we are watching a fairly normal business negotiation process when this much is at stake in a deal. The button we see getting pressed is the 2G rate trigger, but that might not be what Nokia is really concerned about. It could be just a button they choose to push right now, and the thing they really want to get InterDigital to concede might be in a completely different area of their ongoing negotiations.
My best guess(es) for what Nokia's 2G arbitration is really about are as follows; 1) 2G handset rates, 2) 2G/3G "dual mode" handset rates, 3) WTDD royalty pricing being "bundled" with W-CDMA "FDD", 4) positioning in the IDCC/IFX "product package" customer set, 5) just another battle in their ongoing war over royalty rates in general, and 6) just another way to improve their cash flow in this difficult quarter.
Just trying to step back and consider all of the possibilities instead of being focused only on the timing of 2G payments, and the daily market reactions to the status of that particular issue. IMO let "the market" over react in fear of unfounded conclusions, and stay focused on the things we think we know. IFX is a leader in wireless technology and they wanted a 10 year exclusive partnership with InterDigital, NEC is the leader in commercial deployments of 3G technology and they licensed with InterDigital for that technology, China is developing their own version of 3G and they invited InterDigital to join their team, Ericsson went to the mat with InterDigital over 2G and after a 10 year courtroom struggle they said "Uncle!, I'm broke but I will sign and pay what I can.", Nokia paid InterDigital a bundle to develop a portion of their 3G technology for them and understands that InterDigital knows more about Nokia's trade secrets, product technology, and business plans than anyone else.
Even couples that are truly in love with each other and that stay married most of their lives have some arguments from time to time. A lot of the really nasty arguments are about money!
I think Nokia and InterDigital are long time business partners having an agrument over money, a LOT of money. It's also possible that there are some disagreements over Nokia's lack of support so far for their mutually developed WTDD "baby", Nokia's agressive involvement in promoting the WLAN competition of that "baby", and the steps InterDigital has been taking recently to gain support for that same WTDD "baby" from Nokia's big bad competition.
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