Web Site and the Wall Street Journal InterActive column
Not everybody subscribes to the WSJ Interactive where the article appears today - so let me say 2 things:
1. You can get 2 free weeks subscription to try it out (includes Barrons.com) Get info at: wsj.com
and then find article at:
interactive.wsj.com
2. If you're not willing to try it out yet, but want a sample first, here's the article on InterDigital in Sept. 11 WSJ Interactive. (Copyright, 1999 Wall Street Journal)
September 11, 1999
Shareholders' Site Disagrees
With Analysts on InterDigital
By JASON ANDERS
THE WALL STREET JOURNAL INTERACTIVE EDITION
A group of message-board users have started a Web site where potential investors can get information on a small telecommunications company without having to wade through thousands of messages -- or negative comments.
But the creators of the site, TelecomTechstocks.com (www.TelecomTechstocks.com), are all investors in the company, InterDigital Communications, a King of Prussia, Pa., firm that develops technology for wireless communications. Analysts question their optimistic views of the company.
A report on the site says InterDigital's shares, which closed Friday at 6 1/4 on the American Stock Exchange, are "ridiculously undervalued." The author, Bill Dalglish, is an Episcopal priest in Lebanon, Tenn., who says he owns a "substantial" number of shares in InterDigital.
"Obviously, I stand to profit if the stock goes up, so this is not completely unbiased," he acknowledges.
Indeed, negative views of InterDigital are hard to find on the site. Even the company's loss of a long-running patent-infringement battle against Motorola in 1995 was shrugged off as the fault of a jury of "ordinary" Delaware residents who "completely missed the point" of an obvious patent violation.
Moreover, Mr. Dalglish's report notes that InterDigital recently reported second-quarter earnings of $1.4 million, or three cents a share, making it the third straight profitable quarter. But it doesn't note that the profit was sharply lower than the previous year's, when InterDigital earned $27.1 million, or 55 cents a share.
Industry analysts say InterDigital was once a rising star in wireless communications technology, but they disagree with the rosy picture the shareholders are portraying on their Web site. They say the company faces some serious challenges in a highly competitive industry.
Mr. Dalglish says he relied on his own analysis and message-board posters over the years for the report, and is just trying to "get the word out" about the company to newcomers, who were faced with 8,000 postings alone on a Raging Bull bulletin board (www.ragingbull.com).
"People were coming on the boards and saying, 'This sounds interesting. How can we get the story on this stock?' " says Mr. Dalglish, who is also a certified financial planner. People were having trouble finding "quality stuff" on the boards, which were often full of "negative, nasty comments" about shareholders and the company, he adds.
About a dozen shareholders have contributed money to fund the TelecomTechstocks site, which went up two weeks ago and cost about $1,000 to create, Mr. Dalglish says. The site also contains brief profiles of some leading telecommunications concerns in which Mr. Dalglish owns shares, including Nokia and Cisco Systems.
A disclaimer on the site points out that Mr. Dalglish's report was written by people who have a vested interest in InterDigital's stock. Mr. Dalglish says he first invested in the company in 1995 when its shares were trading around $12. The shares have traded between 3 and 6 15/16 in the past 52 weeks.
In his report, Mr. Dalglish also includes a lengthy analysis of how much the company stands to profit if it wins or settles a massive patent-infringement case it filed against Sweden's L.M. Ericsson in 1993. The report says the potential award is "mind-boggling" and could double or triple InterDigital's share price. The report quotes one "usually reliable shareholder" who believes that Ericsson will settle the InterDigital case for $200 million to $400 million.
But Kathy Egan, an Ericsson spokeswoman, disputes the suggestion that Ericsson is looking to settle. "We do not know where this is coming from. There is absolutely no basis in fact, and there are no settlement discussions underway," she says.
Mr. Dalglish acknowledges that the predictions of a sizable settlement with Ericsson are "a bit optimistic." He notes that the Web site does point out that InterDigital could lose the lawsuit. But it also downplays the significance of such a loss, and says it would likely sink the share price 10% to 30% at most, and could be a temporary setback. InterDigital shares plummeted 49% immediately after the company lost its suit against Motorola.
Susan Sutton, a spokeswoman for InterDigital, says the company has seen the TelecomTechstocks Web site. "As a public company we really can't endorse a site we haven't developed ourselves. Still, we think it's great that our investors are so energetic and interested," she says.
Industry analysts say InterDigital got beaten in the wireless business by heavyweights like Qualcomm. "If things had turned out differently some years ago, and technology had gone a different way, we could be talking about InterDigital as the billion-dollar giant today instead of Qualcomm. But it just didn't work out like that," says Iain Gillott, a telecommunications analyst with International Data Corp. in Austin, Texas. "[InterDigital] is just not a significant player now."
Samuel May, an analyst with US Bancorp Piper Jaffray, says he stopped seriously following the company about a year ago. "They aren't on the radar screen of the Street right now," he says. "They have no revenue predictability because they randomly get these huge royalty payments and recognize them all at once."
He says InterDigital has spent too much time going after royalty payments from larger firms and not enough time innovating. "They have some good technical people there, but they have no good business sense or savvy," he says.
InterDigital's Ms. Sutton maintains the company is in a strong position for the future, and she points to a $70 million agreement the company entered into earlier this year with Nokia to develop third-generation, or "3G," mobile technology.
She also says the company has a strong management team, and aggressively trying to recruit a chief executive to replace Gregory Webb, who was fired in May 1997 after seven months on the job. William A. Doyle, the company's president, is serving as interim chief executive.
Write to Jason Anders at jason.anders@news.wsj.com. |
