"Anyone implementing 3G would be utilizing our inventions."
*** It also means companies that develop 3G products would have to pay InterDigital licensing royalties. ***
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From the Philadelphia Business Journal - April 20, 2001 print edition
philadelphia.bcentral.com
In Depth: Tech Monthly
Cell phone technology enters next frontier
Jeremy Feiler - Staff Writer
Though roughly two years away from deployment in the United States, key innovations for the "third-generation" of wireless phones are occurring in Philadelphia's backyard.
The third-generation mobile phones -- known as 3G -- offer broadband services that allow high-speed data transmissions and provide Internet and video links. Basically, 3G will turn cell phones into electronic wallets.
The first of the 3G mobile phones was launched in Japan this year and will be introduced in Europe by next year.
Two local companies -- King of Prussia-based InterDigital Communications Corp. and Mount Laurel, N.J.-based Ulticom Inc. -- are developing software to support 3G.
InterDigital has inked deals with one of the world's largest semiconductor manufacturers and signed its first purely 3G licensing deal with the company that markets products under the Panasonic name.
Specifically, InterDigital is developing a digital cellular technology that encodes conversations with a digital sequence to use all available airwaves. Other so-called standards usually don't assign a specific frequency to each user.
InterDigital's deal with Infineon Technologies AG is an alliance in which Infineon, the No. 2 European semiconductor maker, will incorporate InterDigital's technology on its chips. Infineon has other development pacts with IBM and Intel.
Meantime, a patent-licensing deal with Japan's Matsushita will give InterDigital $19.5 million in up-front payments, as well as recurring royalties. The agreement covers wireless devices that Matsushita sells under the Panasonic name, among others.
To get to this point, InterDigital learned from mistakes it made after developing second-generation wireless technology early in the 1990s.
"I think the biggest lesson in our past was that developing a proprietary, non-standards-based technology was not an area where we had sufficient mass to drive a market," said Howard E. Goldberg, InterDigital's president and CEO. "Our best opportunities were moving toward a standards-based market -- 3G."
InterDigital's technology integrates various wireless standards, which makes it more adaptable to different technology.
"A Panasonic handset has to be able to talk to a Nokia base station, and a Nokia handset needs to be able to talk to a Siemens base station," Goldberg said. "Anyone implementing 3G would be utilizing our inventions."
It also means companies that develop 3G products would have to pay InterDigital licensing royalties.
In fact, revenue from licensing rose from $9.4 million in 1999 to $34.1 million last year. InterDigital has $89 million in cash.
InterDigital spent much of the early 1990s in litigation against companies that it alleged took advantage of its small size and used its technology without paying for the right to do so.
As a result, Goldberg said, instead of trying to do everything to make its business grow, InterDigital focused on what it could do best. For example, Infineon is responsible for sales and marketing in its deal with InterDigital.
"In a sense, we're very, very significant subcontractors," Goldberg said. "We're providing the most difficult, the most advanced part of the content. We're also far removed from the issues in the consumer marketplace. We'll leave it to others who are much better-equipped than we are to assemble the final product the consumer would purchase."
InterDigital plans to increase its engineering staff by a third, to 300, in the next 15 months to spur its development of 3G applications.
"I think the recent agreements with Panasonic and Infineon validate the company's patent portfolio," said William Nasgovitz, co-manager of the Milwaukee-based Heartland Value Fund, which owns 1.7 million shares of InterDigital.
But whereas InterDigital makes the 3G technology itself, Mt. Laurel-based Ulticom Inc., a telecommunications software maker, will create its platform.
Ulticom, whose Signalware software lets telephone companies connect, route, end and bill a phone call, will assist one of Korea's largest electronics manufacturers in its 3G efforts.
The company will work with Dallas-based Samsung Telecommunications America and Samsung Electronics in Korea to create a voice, data and video capability in a 3G wireless architecture.
Ulticom's foray in developing 3G software platforms fits with its history. It was one of the original independent suppliers of a telephone protocol that allowed features such as call forwarding, 800-number service, pre-paid cellular and voice-over-Internet, which uses the Net as the transmission medium for phone calls.
Jeremy Feiler can be reached at (215) 238-5149 or at jfeiler@bizjournals.com. |
