Posted by: olddog967 Date: Tuesday, December 02, 2008 11:08:36 PM In reply to: None Post # of 240404
There has been a lot of posts about what Bill Merritt and a $2.00/unit royalty rate. The following are statement made during 3 prior presentations. Although they were presented over a year and a half period, his remarks were pretty consistent. I would summarize his remarks as (1) IDCC had been receiving an average of about $2.00 per 3G unit, (2) he expected the average rate to go down over time, and (3) if we were to hold at an average of $1.50 per unit in the future we would be receiving significant revenues.
I doubt that this will settle the argument, but at least it should be discussed on a factual basis of what was stated.
Needham & Company, Jan 2008
So give a little bit of background here with respect to what we derive today for royalties on 3G terminal units. Our average royalty, meaning if you took all of the 3G units that are shipped under license for us and you divided that into the revenue that we derive from those units, we get about $2 per unit today for 3G terminal unit shipments. We have as we've mentioned a few times about 30% to 35% of the market under license. So over time if you get out to 2012, we obviously have this significant increase in the number of 3G units that are sold. There will be of course some price decline over that period of time, so we expect that our average royalties will come down. As an example, just to use one number, if we can hold anyone in the $1.50 range over time,then the revenue for the Company will be $1 billion, all of that revenue being able to be achieved through the resources that are in place at the Company today. So just a significant level of operating leverage within the Company.
Needham & Company, Jan 2007
The Company's business model at the end of the day is combining both the patent and the product business. Our goal is to derive revenue on every 3G terminal that is sold. Today, our average receipt on phones sold, 3G phones sold, is a little bit north of $2 right now, so we're doing pretty well.
Certainly, the price of the [spike] phones will come down over time and since a lot of our royalties are based upon percentage-based royalties, then of course the royalty will come down.
The way we deal with the declining price in the market is to add value to our offerings. So today, we get an average of $2 on a patent offering. By bringing the software into the equation and the ASIC into the equation, you can continue to hold that number. Just as an example, if we were to hold even $1.50 a unit and if we were to achieve the same level of market penetration that we achieved on 2G, namely in that 75% range, then you are talking about $900 million of revenue for the Company. So it's a business model that we think is well-grounded; it's a business model that has produced very substantial cash flow over the last few years; it's a business model that we think has a lot of legs going forward, and one that we are pretty excited about. So the opportunity for us I think is real good. Again, we are very well positioned in what is the largest consumer market in the world, and we will continue to drive very heartedly.
Bear, Stearns & Co., Jun 2006
So what does that mean? Today, we receive somewhere north of $2 per unit on an average, with respect to WCDMA terminal use. And [as] I said, we have 35 to 40% of the market [covered]. So we will do two things. We'll use our patent position to drive our coverage in the market. Patent position gives us entitlement to cover 100% of the market. We will then use the patents as well - our product position to drive the amount of money which we receive on each unit.
So if we use 2010 as an example, if we can get an average of $1.50 per unit which is lower than where we are today, and we can get that on 75% of the market that means our annual revenue will be about $800 million a year. Several things about that. One, we can generate that revenue without any significant growth in the company. Today we have a very strong patent licensing program and products programs, and those programs will largely be the same as we go after this revenue. Certainly there will be some growth, but we don't need to grow the company substantially to get there.
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