Replies to post #297482 on InterDigital Inc (IDCC)

[JeffreyHF]

If one were to take the revenues earned from IDCC's 3G licenses with 50% of the available market, and double it, then compare it to the revenues booked by Qualcomm's QTL segment, one could loosely have a sense of the relative values of their respective 3G patent portfolios.

[hock1]

DR...Not to prolong this discussion....but, the premise of dividing a market cap into components, derived by segregating the respective revenue and associated margins, is a specious one to begin with. However, the fact that QCOM derives more than half of its revenues from a lower-margin business segment underscores my point even more. I.e, IDCC' s valuation is not "diluted" by a lower margin segment.

Anyway, to clear this up (I hope), my original point about relative market caps was simply a comment on Nuke John's post about LTE patent values. It is just one of a myriad of metrics that doesn't seem to make sense to me.

If one asked me to prioritize the apparent anomalous metrics in valuing IDCC, relative MC would be near the end of the list. P/E of 8 or so (actually closer to 5--ex cash) vis-a-vis net margins of 45% would be the most glaring disparity.

Thanks for the response.

GLTA

[NukeJohn]

From indepedent analysis of IDCC's Essential Patents covering LTE/4G, it appears that at worst case they are a strong second to Qualcomm.

http://www.slideshare.net/alexglee/3gpplteessential-patents2009q2brief

Qualcomm is getting ~5% on 3G and have stated they want 3.25% on LTE. They will still be getting 5% on phones that have both 3G and LTE capabilities. It remains to be seen what rate IDCC will command for their LTE IP, but I daresay it will be a variable rate and it will be a heckuva lot higher than their 3G rate. Based on the strength of their LTE portfolio, they should be asking at least somewhere in the 2.5% range for anyone willing to sign a license now. They may not get that, but they could easily wind up getting somewhere close to 2%. Of course, it will eventually require IDCC to take someone to the mat (either in District Court or the ITC) on the LTE patents. I assume they will choose the ITC because that venue is much faster.

JMHO,

NJ