Interdigital Communication(IDCC) Message Board

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Technology Stocks : Interdigital Communication(IDCC)

IDCC 369.41

-3.0%

Nov 7 3:59 PM EST

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To: Bobby Yellin who started this subject	11/3/2002 9:51:27 PM
From: Gus	of 5195

RE: SEASONALITY Handset sales drive royalties. With global market share approaching 40%, Nokia's Mobile Phones results best reflect the industry's seasonality. Nokia's fiscal year is the calendar year and its 4th quarter has accounted for 31% and 29% of sales for the last 2 years. IDCC's current royalty revenues, however, are still driven by Japanese manufacturers who typically report semi-annually (September and March) and close their books in March so the seasonality of this recurring revenue stream is still hard to identify with any reliable degree of precision since actual revenue recognition, particularly for the peak quarter, may be one or even two quarters in arrears. Once the Nokia and Samsung royalties start coming in, however, IDCC's seasonality will probably start to track Nokia's seasonality. Samsung's fiscal year is also its calendar year. Samsung is currently growing fast with its much smaller GSM handsets growing faster than its much larger CDMA handset and it is well on its way to cementing its hold on the 3rd spot behind Nokia and Motorola. The other point to consider is Festo. The appeal's court en banc ruling in Festo vs SKKKC in November 2000 had negative implications for IPR holders like IDCC because it was generally seen as narrowing the scope of patents. This perceived weakening of IDCC's patent portfolio may partially explain why Samsung filed for arbitration in February 2002 regarding its 1997 licensing agreement. How the recent US Supreme Court ruling overturning the appeal's court en banc ruling in Festo vs SKKKC affects this issue remains to be seen. Nokia's royalties, of course, are contingent in some way on the resolution of IDCC vs ERICD, which goes to trial in early February 2003. My sense is that the current process underway to harmonize the principles-based accounting system in Europe with the rules-based accounting system in the US by 2005 will move Nokia and IDCC to modify their 1999 agreement, particularly as it relates to IDCC's revenue recognition and Nokia's expense recognition methodologies under the 1999 agreement.

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