Conference call 11/4/98 Report:
I am sure there were a number of differed expectations as folks listened to the IDC conference call this morning from President Doyle and investor relations vice president Rip Tilden. If one expected a major positive announcement of some sort, like a new alliance, they did not hear it is morning. Apparently the stock price rose yesterday in anticipation of such announcement, which was not forthcoming. Investors who are with IDC for the long-term however will find some reassurance in what was said, I feel.
The overall tone of the initial statement and responses was, as what has one might expect, very positive. Obviously, both Doyle and Tilden are very confident that IDC has been on the right track for the past couple of years, is now, and will continue setting a very positive course. I did notice that no indication was given that there will likely be another licensing announcement before the end of the year. However, Mr. Doyle did say that management was burned a little last year when they predicted an alliance would be in place before the end of the year and it did not develop actually until this year. He said he was being extra of cautious therefore not to make any predictions. (Personally, I think many of us feel, that IDC, because of past experience, bends over backwards a little too far to avoid hyping the company's prospects.)Long-term, however, I heard Doyle and Tilden a indicating a very firm belief that the company will make substantial progress in enhancing shareholder value by working diligently to reach licensing agreements that will produce a series of revenue streams which will be productive for the next several years.
Jim Lurgio raised the issue of the recent press release and then asked an excellent question about Alcatel and TDMA licensing. Jim said that Alcatel so far has licensed only B-CDMA technology and, despite the action in the German courts, there has been no announcement of any TDMA licensing with Alcatel, and he asked why. I think it was Doyle who responded that they made a strategic decision in their dealings with Alcatel not to raise the issue of TDMA fees until there is good climate of trust established between Alcatel and IDC which they anticipate will develop over the next few months as both companies work diligently to produce the second generation ASIC chip needed by Alcatel for its B-CDMA product line. I can see management's reasoning on this, especially since President Doyle tells us that Alcatel is not a major TDMA player and has not been one. He did indicate however that the subject of TDMA licensing will be raised when management feels the time is appropriate, and that they do not intend to permanently leave Alcatel "off the hook."
3G: Doyle and Tilden were asked what we are doing to get a "place at the table" where decisions will be made about third generation standards. The response was we are already firmly entrenched at the table and deeply involved in the discussions. Management suggested that the 3G discussions, in which we are an integral part with companies like Motorola, Seimens etc., are an excellent opportunity to showcase InterDigital's technology. Every company involved, of course, has a goal of getting pieces of its technology into the standard. They indicated that other telecom representatives were impressed favorably as they continue to hear and see what IDC's technology could offer. The Doyle said our B-CDMA technology is second to none, we have the very best and we're making a strong case for our IPR being a significant part of the eventual 3G standard.
Broadness of our contacts: Another question concerned whether we are making any effort to license companies outside of Japan, since that seems to beware licensing agreements are coming this year. Management indicated that we are aggressively seeking alliance partners and licensing agreements throughout the world, not just in Japan. Further, they indicated that widespread licensing was a very important component in the plan to provide streams are revenue.
Second generation ASIC chip: I understood management to say that we will be a much better position when our second generation ASIC chip work is completed by Texas Instruments this year. Alcatel, for one, is waiting on that chip before they can offer a specific B-CDMA WLL product, which we expect they will market very aggressively as soon as a chip is ready.
Product trials: management indicated that our trial in the USA and Seimens in China will not be the only testing of the B-CDMA technology. Our alliance partners are developing additional sites, which management is not free to discuss.
Available cash: We already have plenty of cash and our situation will be further enhanced with the Denso money, which will be credited in the fourth-quarter.
Buy-back of IDC stock: management said that it has not purchased any IDC stock since being authorized to do so earlier in the year. One questioner asked why we're not buying back stock now since we have plenty of cash and the price is still relatively low. Management responded that they have looked at that question over and over in the past and they will continue to address the issue frequently in the future, but they gave no indication of their plans.
Bypass telephone service: management was asked whether our technology would be helpful in providing so-called bypass service in urban areas in the United States. The response was that the company believes our technology would be very helpful in providing a way for competition to increase locally through wireless telephone service. We are in an especially good position to provide this technology because our system readily provides not only voice service but ISDN rate Internet access, data transfer capability and other benefits. We offer the technology to help a competing telephone company to gain very quick access to customers without having to lay cables or pay access charges to companies that own existing wire or cable lines. Management indicated that the market potential for us here is good. I got the impression that management is absolutely delighted to be working with Pioneer in the U.S.-based field trials especially because of Pioneers connection with MCI. They indicated that MCI has expressed a strong interest in our wireless technology for bypass service, but management was not free to provide any details or comment further, except to say that MCI has indicated strong interest in our field results and we're discussing with them the growing demand for bypass service.
Marketing of our technology: management indicates that both Siemens and Samsung are very active in making tenders throughout the world for telecom systems involving our technology and that they have strong confidence that are alliance partners will capture significant orders. For competitive reasons, management said they could not provide any further information except to convey their strong optimism.
Alcatel's research before choosing IDC: management is strongly encouraged by Alcatel's alliance agreement, especially because Alcatel became our partner only after an extensive worldwide search for the very best CDMA technology in the world, including university studies and research at several technology centers around the world. Alcatel expects that IDC technology will give them a jump start in the market and they are continuing to devote resources to our technology because they believe it will result in sales. Management's goal has been and will continue to be acquiring more partners in the wireless marketplace.
Standards: management is working to achieve the objective of the CDMA becoming the de facto WLL standard in the United States and it believes that we are competitive with Qualcomm's IS95 and other fixed cellular products.
Cost of our technology to telecom customers: One questioner noted that analysts have targeted five hundred dollars per line as the cost if they WLL product is to be commercially successful in an urban environment competing with wires and cable. Management indicated that we can compete at that price and we expect that to be the price for some time. Further, we believe that our second generation product is much more robust than the competition is offering. However, management declined to address any engineering specifics because neither Doyle nor Tilden are engineers.
New leadership: I thought I heard build Mr. Doyle indicating that a process to find a permanent executive for IDC was in its final stages and there was an expectation that there would be an announcement relatively soon. Later I heard that we are not seeing the need for a CEO and that things are going along final without one. So perhaps someone can give some verification: are we looking for a new president? CEO? Chairman?
Lucent: One questioner asked that since a former Lucent executive is now employed by IDC does that indicate we're on the verge of closer relationship with Lucent. It appeared to me that management was tip towing around this issue (probably wisely) Doyle expressed great admiration of Lucent and indicated that for obvious reasons they couldn't comment further on he Lucent question. I didn't get a feeling one way or another about it, except that IDC appeared to be very interested in working with Lucent.
Internet Bulletin boards/chat rooms: Rip Tilden and Bill Doyle indicated that investor relations was a very important part of IDC's interests. I asked whether they regularly monitored Yahoo and other boards with threads related to IDC. I think it was Rip who responded that IDC like many other companies feels is important to monitor the Internet boards because it gives them a sense of what their shareholders interests and questions are. He said it would not be appropriate to enter the discussion directly through the bulletin boards, partly because some persons might receive information that should be made available much more broadly. He said however that comments made on the Internet bulletin boards gave management an idea of the issues that are out there and help them for the responses that they make public from to time.
Overall observation: given management's strong reluctance to encourage expectations that the company may not be able to deliver at the time specified, I thought Rip Tilden and Bill Doyle did a good job of communicating their very strong long-term optimism, indicating that IDC owned intellectual property rights to the best technology of its kind and that step-by-step shareholders would be rewarded for their investment now and patience in the future.
How about others who heard the call? Comments or corrections? Items I haven't mentioned?
Special thanks to Jean Roper for letting us know about the call.
Bill |
