The legal eagles on the IDC club at RB and SI have, at one point or another, calculated the odds of a settlement before, during and after the Markman proceeding, which many believe can be deterministic of the final trial outcome depending on the way the Judge rules on claim construction issues as questions of law to be presented to the jury, the triers of fact. The argument for Ericsson to settle at various points before, during and after the jury trial have also been calculated. The best a laypeople like us can really strive for is a basis for optimism.
The thing is the focus should not be exclusively on the legal issues but also on the subtle fact that IDC (135 engineers) has been part of the Nokia ecosystem for close to a year now. NOK is a 133 year old company that has morphed into a sleek and fleetfooted global technology company with a relatively young workforce and a laser-like focus on turning global business and consumer transactions into long-term technology relationships starting with the handset.
It's also a dividend-paying stock with a wider global ownership base than most technology companies and I think that's one of the reasons why Jorma Ollila can give a firm guidance that "margins will go down" (read: market share) to quarterly-oriented U.S. analysts without creating a stampede.
Of particular importance to a company like IDC, which has never been able to put together the financial performance to match its arguably groundbreaking work in TDMA and CDMA, is the fact that Nokia has a cutting-edge time to market mentality to go with its huge R&D budget -- 2.7 billion Euros in 1998 and 1999. If the only benefit that IDC provides Nokia is a TDMA and CDMA patent umbrella for Nokia's engineers, that in my estimation is worth to Nokia a great deal of money, but then IDC only has 53 million shares outstanding so a $1.00 EPS is only $53 million in profits, etc. Those are not unreasonable numbers in an industry that posted close to $100 billion in infrastructure and handset revenues and where the industry PE multiple is around 62.
But wait, one issue that IDC is addressing along with other American patent holders is how a fabless company can protect its IPRs while participating equitably in converging global markets like telecommunications, computing and entertainment without being grinded down by the natural forces of manufacturing scale. The rule rather than the exception is that unless an IPR holder can continue to out-innovate the manufacturers, the manufacturers tend to develop the capacity to reduce pure expense items like royalties to 0 or use other variables in the price-performance equation to marginalize those expenses.
The development/foundry partnerships IDC formed with vendors like VLSI, LSI and now TXN clearly indicate that IDC is committed to embedding its intellectual property and systems integrations skills in SoCs, systems on a chip that, as I understand it, include proprietary IP on three levels:
PHYSICAL LAYER -- where signals are processed.
LAYER 2 -- where information is packaged.
LAYER 3 -- where information is routed.
Past is not prologue. IDC was always going after broadband CDMA and its day may be coming especially now that time to market is key and edge-of-the-network broadband players like Ericsson will find out in the marketplace IMO that large companies need to establish a proactive and constructive policy regarding innovative small companies and startups if it ever hopes to compete with the Lucents, the Nortels and the Ciscos of the world. This end of the year price action may have been a harbinger of things to come for IDC even if not all of its TDMA and CDMA positions come to fruition.
Dec-31-1999 75.0 -5,488,500
Dec-30-1999 62.0 12,657,900
Dec-29-1999 43.5 -5,007,200
Dec-28-1999 23.6 -1,674,000
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