Replies to post #18569 on InterDigital Inc (IDCC)

[blueskywaves]

We're in the same ballpark, Ronny. My numbers are just more conservative and originally used in 1999 to keep some people's feet on the ground when people were just throwing around whole numbers and percentages as well as billions.

 
 ASP           $0.42          $0.63 
 .... 
 .... 
 $150          0.28%           0.42% 
 $200          0.21%           0.32% 
 $250          0.17%           0.25% 
 

Nokia's indicated royalty rate is no more than .5%, before discounts for prepayments

[blueskywaves]

Ronny,

Right now we have two ways to estimate IDCC's royalties from Nokia and Samsung.

1) Your 0.05% or less rate in royalty per handset (assumed ASP of $160), before prepayment discount of 20%.

2) My range of an artificially flat across the board $0.42-$0.63 in royalty per handset, net of prepayment discount.

TeeCee was gracious enough to add his own methodology. He assumes that IDCC's 2G deal with Nokia only covers approximately 70% of Samsung 2002 handset total since IDCC's deal with Nokia does not include 2G CDMA and 3G WCDMA (FDD).

He also assumes that IDCC's 2G deal with Samsung only covers approximately 40% of Samsung's 2002 handset total since IDCC's deal with Samsung also does not include 2G CDMA.

The end result is that he comes up with an estimate of approximately $0.75 in royalty per handset on 70% of Nokia's 2002 handset total and 40% of Samsung's 2002 handset totat.

The moving parts of his model, of course, are similar to ours:

1) Nokia had 36% of the 2002 global handset market which generally split along this line: ~85% GSM/TDMA and ~15% CDMA. Nokia had 45%-50% of the GSM/TDMA market but only 10% of the CDMA market.

Nokia has a fairly aggressive CDMA rollout this year that may increase its 2G market share from 10% to 15%-20%, but it also has an even more aggressive TDMA/GSM rollout paced by its phones with digital cameras. Nokia now expects to sell 45M-50M phones with digital cameras this year after selling only 2M-3M phones with digital cameras in 2002. Nokia's aggressive ramp is already creating spot shortages in the digital camera supply line so Nokia's 2G TDMA/GSM/CDMA 2003 product mix remains to be seen. As goes NOkia so goes IDCC's royalty exposure to 70%-80% of Nokia's handset share.

2) Samsung had 10% of the 2002 global handset market. It had approximately 30% of the 2G CDMA market and less than 10% of the 2G TDMA/GSM market.

2002 was the first year that Samsung's GSM business became just as large as its CDMA business. I think Samsung's GSM business will continue to grow faster than its CDMA business especially now that the South Korea market appears near saturation and the Indian and Chinese markets are taking longer to ramp. This means that there's a good chance that IDCC may increase its royalty exposure to Samsung's handset share from 40% to 50% in 2003.

I think we're all in the same ballpark and we should be able to refine these numbers further after the conference call.

P.S. Thanks, TeeCee. Check out Network Engines (NENG).;-)