Why buy IDC? - "in a nutshell"
Welcome all newcomers! With the strong interest in InterDigital created recently, here is a fairly brief argument for including IDC in a diversified portfolio of stocks. Links are included for further DD.
The bottom line for a decision in favor of InterDigital, is this:
FUNDAMENTALS, FUNDAMENTALS, FUNDAMENTALS!!!!
1. There are 2 types of cell phones in the world, 1. analog and 2. digital
In case someone unfamiliar with that wants to know, see a beginners level treatment of that briefly at:
telecomtechstocks.com
2. The world has been switching from analog to digital cell phones because;
a. digital is clearer and more efficient and can offer more services and therefore more revenue to telecoms (that's what they are bottom line there for - revenue and earnings for shareholders
b. There's not enough radio spectrum available to possibly service all potential users if they are using analog because analogue takes up much more limited spectrum to do much less
c. Data transmision is coming at us fast (Internet etc). Need digital to do that. Second generation (2G) can do some of that now using both TDMA/GSM or CDMA
see: telecomtechstocks.com
3. From a worldview, the U S is completely atypical re: digital phone distribution and use. We are a big mess. TDMA competes with CDMA which competes with PSC (Sprint etc). You need dual mode or triple mode phones to get around here. Europe and Asia (except Japan and Korea) are all using the same digital tech and don't want to fall into the U S problem so they work hard to keep everybody the same. They use a varient of TDMA, which is called GSM.
Frankly, if anyone is a shareholder in a wireless communications company and doesn't know what GSM is, you haven't done your due diligence. Quit what you're doing and read this easy to understand and brief article, its essential info:
telecomtechstocks.com
4. 85% of digital phones worldwide are TDMA or its cousin, GSM. The other 15% are almost all Qualcomm's CDMA phones (I have one and like it) and those are almost all in the U S and Korea, where they have great market share and give U S investors the idea that Qualcomm has the keys to the castle. Phooey! See these couple of important paragraphs at:
telecomtechstocks.com
5. (Finally the meat of all this - we took the scenic route to get into context better) InterDigital developed TDMA and its cousin GSM years ago and have been making refinements ever since. (IDC has 800 patents worldwide). Remember, 85% of the world is on TDMA or GSM. The actions of the U S Pagtent office announced on Monday by IDC confirms this very bold and important claim: You can't do TDMA or GSM without using InterDigital's patents. Motorola in 1995 won a court case that all observers thought was a travesty of justice. Jurors understood next to nothing about the technology (and had to send word to the judge during their deliberations: "What's the difference between a wireless cell phone and a regular phone like we have at home.") (Importantly, since that trial, by Supreme Court edict in "Markman", jurors are now told by a court asppointed expert (who hears testimony before the trial) whether patents are valid etc.)
This Motorola stuff is a very important part of IDC's history and has affected its share price ever since. IDC shareholders NEED to understand what happened. Here's a very brief report on that Motorola debacle (oops, this is another brief but very important (altho ugly) sight along our scenic jorney:
telecomtechstocks.com
The late November announcement on patent revalidations means the Motorola case jury was dead wrong. Motorola may be able to get by, but no one else will now. IDC's extremely capable patent attorneys in Texas (Fulbright & Jaworski Group) will be hounding them to death now with Monday's decision and a decision on the European Appeals court level last year that says the almost the same thing. So now we're covered in U S and Europe. (Asians generally have been paying up already, except for Sony and Fujitsu - and they will pay, I believe, as IDC now has the clout to make them pay). No more "Mr. Nice guy." We've got everybody now by the you know whats and were not going to let go till they pay up worldwide.
That means this: Qualcomm licenses 60 manufacturers. IDC currently licenses 23. Now were going after the remaining 37. And not just for future use. We are demanding payment for the hundreds of millions of TDMA or GSM phones and all the supporting infrastructure THEY EVER MADE. Let's see 2% or 3% of umpteen billions of dollars is... That's OURS! And we want it NOW! Were offering good terms right now to anyone who signs on -- now that we've got their attention with Monday's Patent announcement. But if we have to sue them -- big bucks, baby! IDC has a war chest of $75 million to get these 37 additional manufacturers to pay what they already owe and continue on paying on what they will manufacture. (Nokia paid $30 or $40 million to IDC this year. If someone missed Monday's very important news from IDC (that made IDC the largest volume and biggest price increase company traded on the AMEX), it is MUST READING:
telecomtechstocks.com
That means we've got one heck of a lot of revenue coming (billions) from whats been made already around the world. Revenue projections for IDC I've seen do not reflect any of this back due royalty income and are therefore totally inadequate.
But that's just for back royalties!
TDMA and GSM will be the far predominant tech for the next five years. Hundreds of millions of these products will be sold each year for years to come'. We will get royalties on that. That's why we hired such great attorneys. Very soon it will be indeed "No more Mr. Nice guy" time! See recurring revenues for a brief addition to what I've said:
telecomtechstocks.com
6. Third Generation wireless will eventually come and that will be exciting. Last month the ITU announced Third Generation international standards. (IMPORTANT, see:
telecomtechstocks.com
Telecom equipment designers and manufacturers can now start working on future products. One of IDC's main thrusts now is to help them design those products and sell them the basic "system on a chip" we will help them design (25% profits on those chips). This is BIG - Potential IDC investors have to understnad this new paet of IDC's business activities, so this is brief but MUST READING on IDC as an engineering consulting company (this "engineering support" is also in the new plan Qualcomm is following very successfully):
telecomtechstocks.com
7. BUT (big "but") Not everyone will have 3G products all at once, just as in the U S today some people have 1G (analog) and some have 2G (digital). In a few years, 3G will come into the market (IDC/NOKIA is developing the first products worldwide right now in Japan for Japan's biggest (and hugely successful financially) wireless, NTT DoCoMo). So everyone will need wireless devices (many more products than just cell phones by then) that can communicate between 2G digital (which are 85% IDC's tech based TDMA or GSM and the new 3G stuff. Guess what? No one, not even Qualcomm or Ericsson, will be able to make a device that is dual mode (new 3G and TDMA/GSM 2G) WITHOUT USING IDC's PATENTED TECHNOLOGY. If it can interface with any TDMA-GSM product, then that product will include an interfacing component licensed by InterDigital. The Company says it has been "extremely active" (strong term from our mild-mannered attorney leadership) in submitting interfacing and other tech and deciding upon what tech will be approved for the new standards. IDC has had seats on 2 of the 4 international policy committees. We've probably been more active than anyone else in the world! And our stock really caught Wall Streeet's attention in November when interim President Howard Goldberg shot that cannon ball across the bow. Those that understood what Goldberg was saying started BUYING shares of IDC - smart!
If someone somehow missed that news, read it here. Its revolutionary:
telecomtechstocks.com
8. BUT, there are RISKS as well as rewards in the purchase of any tech stock these days, including one like IDC that has just begun to move up in price. Please read what I've written recently about the risks vs. the rewards of buying InterDigital:
telecomtechstocks.com
Again, thanks for your great question!
Bill Dalglish, editor
TelecomTechStocks.com
Since I'm a CFP, and these remarks are optimistic and forward looking, its appropriate to include this important disclaimer statement and to remind you that I, like many of you, own IDC stock and I will benefit from its rise in share value if more people keep buying it too. Link:
telecomtechstocks.com |
