dndodd: I think the market looks at a company's future income from all known factors and assesses a valuation based on that information.
Granted, MOST of IDCC's income is not easily determined because of the confidentiality of their contracts and rates.
LG is probably the best example. When their contrac expired in December, the street did NOT assign any income attributible to LG for 2011 and rightfully so. No renewal means no payments means no income. The street doesn't 'accrue' income in anticipation of a renewal. Just like IDCC deferred the recongnition of income from the one customer that is now in arbitration.
And when the renewal license is finally signed, the 'catch-up income' (2 quarters for 2011 and soon to be 3 quarters) are acknowledged as 'one-time catch-up' and then their next period(s) income is adjusted based on the terms and amounts of the contract.
'Windfalls', 'audit adjustments', and 'one-time income and/or expense items' are 'adjusted in or out' to get a 'regular income stream' number.
A 'win' at the CAFC will only result in two positives for IDCC:
1. The collection of past royalties as a one-time recognition of income
2. A reinforcement to non-payers that THOSE PATENTS IN QUESTION are valid, enforceable, essential, and payment is expected and MAY CHANGE those non-licensees into now licensing with IDCC.
On the other side, a 'loss' at the CAFC may signal to non-payers or non-licensees that maybe they don't need to license until sued and a victory is in IDCC's hands.
Somebody commented that QCOM's licenses (for the most part) expire in 2017 or some date into the future; that's why their income streams are less effected by the 'what if so-and-so doesn't renew' issues -- because they are not at that stage this or next year. BUT, in 2016 or 2017 or whenever the licenses begin to expire, the street may have serious concerns about future income at that time.
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