Fun Reading from Forbes:
January 04, 2000
One Week View
IDC: a wireless winner
By Charles Dubow
NEW YORK. 4:35 PM EST-On Dec. 30 shares of digital
wireless applications maker InterDigital Communications
Corporation (amex: IDC) reached an all-time high of $82. Since
early November, when it was trading at just over $5, the stock
had begun a runup that would have given a mountain goat a
nosebleed. Even though the stock is trading today at just
above $57, the company, which had been founded in 1972, has
never seen such prices. What happened?
The short answer is that Wall Street is waking up to the fact
that wireless applications, including voice, data and multimedia,
are going to be one of the most dominant technology trends in
the years to come. (Witness, for instance, the 2619% rise in
Qualcomm's (nasdaq: QCOM) stock.) It is estimated that by
2002 there will be more than 1 billion wireless subscribers
worldwide.
"In September the ITU (International Telecommunications
Union) adopted third-generation standards for wireless, and the
market started to look around for companies that were
positioned to take advantage of that opportunity," says The
Yankee Group?s Phil Redman. "It saw IDC."
Redman attributes the stock?s rapid appreciation to the basic
recognition that IDC has hundreds of patents for proprietary
CMDA (Code Division Multiple Access) and TDMA (Time Division
Multiple Access) wireless technologies. He also cites a joint
development project with Nokia (nyse: NOK), the world?s
largest maker of wireless handsets, as well as a licensing
agreement with AT&T (nyse: T).
The company is also working with second- and third-tier OEMs
(original equipment makers) as well such as Samsung, Alcatel
(nyse: ALA) and Seimens (nasdaq: SMAWY). These companies
will be crucial to IDC?s future growth as larger companies move
to developing their own in-house chip capabilities.
"IDC has really good potential for the future," says Redman.
"It?s not what?s hot today. That?s the Internet. But this is a
technology company. It?s not consumer friendly and it?s difficult
for most people to understand what they?re doing."
What makes third-generation (3G) technology so compelling is
not only that it can bring the Internet to wireless devices, but
that it has the potential to do so at broadband speeds.
InterDigital is one of only a few companies in the world that
have developed broadband wireless technology and
successfully embedded it into commercial product. Currently it
is working with Texas Instruments (nyse: TXN) to complete an
advanced ASIC (application-specific integrated circuit) chip set
utilizing its Broadband Code Division Multiple Access (BCDMA)
technology for use in wireless applications.
For years the company focused on wireless local loop access, a
business it has now moved out of. Over the past nine months
the company has made an adjustment, according to Howard
Goldberg, IDC?s interim president and a six-year veteran of the
company. He compares IDC?s strategy to that of Qualcomm's. If
you strip away the infrastructure business, what you have left
is a company that has a fundamental technological strength, a
patent monopoly and a capability for providing content to
companies that want to practice a particular competency.
"When you really are the master of a technology, as we are,"
says Goldberg, "you can design lots of applications layers. We
make the engine and the transmission. There are many
companies looking to enter the market who want the engine
and transmission, but want to design their own seats and
body."
Goldberg also notes that the company is operating at a profit,
has a positive cash flow, almost no debt and, best of all,
roughly $80 million to $85 million in cash.
Goldberg sees IDC as a pure play that has a core competency
and heavy barriers to entry. "Even hard dollars can?t replicate
that very easily," he says. "We saw there would be an
evolution of a voice-dominated cellular system and focused the
whole company on it. Our vision?s ahead of the market?s and
now the market is beginning to understand that." |
