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Technology Stocks : Interdigital Communication(IDCC)

IDCC 359.98

-3.2%

1:26 PM EST

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To: Gus who wrote ()	2/11/2000 9:37:00 PM
From: Bux	Read Replies (1) of 5195

You keep on insisting on IDC is an earnings story but can't even acknowledge the sharp rise in recurring royalties. Essentially royalties are earnings since they tend to go straight to the bottom line. Of course costs need to be controlled and the royalties should be large enough and growing at a sufficient rate to allow the kind of earnings growth that lend to rapidly rising share prices . Of course that's basic but I wonder how it relates to IDC's TDMA recurring royalties. I mention this because the expected duration of that royalty stream will greatly affect the value the street will place on those royalties. I think we all agree that wireless is moving toward spread-spectrum technologies which are already starting to slow the growth of TDMA based technologies although I'm sure we will probably disagree on how quickly this will happen. That's o.k., the two extremes can be used to establish a range of values that can be applied to this royalty stream. I am aware that many anticipate 3G CDMA royalties to begin to "kick in" with the simultaneous decline of the TDMA royalty stream. However, the probability, timing, and the amount of these two royalty streams are still uncertain, and even more importantly, the two streams are almost completely independent of one another except for the relationship mentioned above. For these reasons, it will be easier to estimate the value of these two potential royalty streams if they are valued independently. It is clear that the TDMA royalty stream has the lower potential value since TDMA systems will be gradually replaced with CDMA systems in the foreseeable future. In other words, the street will be hesitant to assign a high multiple to a royalty stream with growth that is projected to begin shrinking as 3G spread spectrum technologies gain momentum. So clearly, the IPR that long-term investors are pinning their highest hopes on is based upon 3G CDMA which has the most potential longevity and eventual market share which translates to a higher value placed on each dollar of CDMA royalties. The high value placed on growth stocks results from growth that has no end in sight, not growth that is expected to start shrinking. I am more than a little surprised that IDC investors do not seem very concerned with the pioneering CDMA patent rights that were sold to only one company, even going so far as allowing them to sub-license to others. This could easily give Qualcomm the edge allowing a domination of the CDMA market in ways not foreseen by IDC investors. I'm surprised there is no discussion about this even though recent information has disclosed facts that should cause even the most die-hard IDC investor to question the notion that Qualcomm holds the keys to 2G CDMA but IDC has the 3G keys in the bag. I'm not sure the concept that there "will be plenty to go around" is neccesarily any more valid. Other sincere opinions welcome Bux

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