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Technology Stocks : Interdigital Communication(IDCC)
IDCC 371.89+1.9%3:59 PM EST
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To: D.J.Smyth who wrote (2738)9/23/1999 6:32:00 PM
From: Ruffian  Read Replies (1) of 5195
 
WSJ>

September 23, 1999

InterDigital Interest

Mr. Anders,

RE: ("Shareholders' Site Disagrees With Analysts on InterDigital") I found it
interesting that The Wall Street Journal was the first to give Bill Dalglish's
site some exposure and I'm sure many more writers will follow your lead.
I'm also happy you provided some comments from those who claim to follow
the industry.

The article states: "Industry analysts say InterDigital was 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."

The only thing Qualcomm (QCOM) has beaten IDC in is the licensing of
their technology and as investors in IDC we are hoping for the same
success. As industry analysts know, Qualcomm sold their infrastructure unit
to L.M. Ericsson (ERICY) because it was a losing part of the business and
also their joint venture on handsets hasn't been that profitable.

So how has QCOM amassed all this wealth? If we look at the CDMA
wealth alone the bottom line is licensing and alliance revenues and the sales
of ASICs to the licensees who are unable to design their own.

Let's look at some numbers. There are well over 200-million users of
TDMA/GSM and 30-million users of CDMA or Qualcomm's IS-95 so what
does Mr. Gillott mean when he said "if technology had gone the other way"?
With GSM/TDMA users outnumbering IS-95 users 7-to-1 what he doesn't
realize is that it has gone the other way. China was to be a prime target for
CDMA or IS-95, yet billions in GSM contracts have been awarded in 1999
while very little or nothing has been awarded for CDMA. Assuming
InterDigital was as successful as Qualcomm in the licensing of their patents
and we look at the number of users, who's the better investment of the two?
InterDigital has less than 20 licensees and Qualcomm around 60.

The patent dispute between Motorola and InterDigital was a devastating loss
to us investors and sent all the analysts covering IDC to the exits. Had the
Supreme Court's Markman decision come a few days earlier things might be
much different now. For InterDigital's fate to be sealed by jurors who had no
knowledge or understanding of patents or the technology is a miscarriage of
justice that will be righted in the ERICY versus IDC litigation. It was during
the Markman pre-trial hearing that ERICY and Qualcomm came to terms
and ended their dispute and many of us InterDigital investors feel the same
will happen with our dispute.

With ERICY laying claim to have built almost 50 % of the infrastructure for
the over 200 million users of GSM/TDMA the revenues that could come
from ERICY alone in this litigation is staggering. It will also produce
licensing agreements from the many companies who are lurking in the
shadows hoping ERICY can give IDC the knockout punch.

If 1.5 % for infrastructure and 3 % for handsets are reasonable numbers,
how much might IDC have coming for over 200-million users of which many
are on second and third-generation handsets? With almost $2 in cash and
another dollar in tax write-offs this stock is priced like an option with no
expiration.

Most analysts think Qualcomm holds the keys to the castle technology-wise
and I hope you might ask the analysts that if this is so, then why has Nokia --
the leading handset manufacturer in the world -- chosen InterDigital to help
them in their 3-G effort ?

Jim Lurgio
jlurgio@bigfoot.com
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