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Technology Stocks : Interdigital Communication(IDCC) -- Ignore unavailable to you. Want to Upgrade?

To: Jim Lurgio who wrote (3421)	1/17/2000 4:51:00 PM
From: D.J.Smyth	Read Replies (2) \| Respond to of 5195

Jim. Comments from the bull: (there still appears to be a general lack of understanding regarding IDC's position in the market place in regard to both it's 3g position and TDMA IPRs) "From the Morgan Stanley analyst review of Nokia (report I believe you faxed to me): Nokia's comments backed up by analyst's summary: A. "The handset industry is growing faster than people realise. Nokia expects that global mobile subscribers will reach 1 billion by 2002..." B. "The replacement market will be a key driver for growth; Nokia says it will be 70%-80% of units sold over time..." C. "Nokia will probably be more dominant than many think..." D. "Size buys a whole range of advantages..." E. "Nokia is shaping the industry and driving internet mobility." F. "Handsets are as good as infrastructure. Higher revenue growth due to the rising replacement market...means that Nokia deserves a comparable valuation to the infrastructure players..." G. "Nokia raised it's revenue growth target in 2000 from 25-35% to 30-40%" H. "Accelerating penetration rates...Nokia now believes that penetration will accelerate between 20-30%...not just a Nordic phenomenon" I. "Ever increasing Gap...Nokia believes it can grow its share in all standards...particular targets are CDMA (where Nokia's US market share is running 20% currently) and Japan...Management suggested that Brazil had been...strong...until recently an Ericsson-dominated space. We think this has been driven by a strong pre paid uptake. Nokia's market leading position follows the release of its 5100 TDMA handset (there)." J. "...Nokia emphasized that marketing is only one third of the brand building process; the rest is about people & processes and products & services." K. "...Nokia believes that the world will not be PC-centric but mobile phone-centric, with internet enabled mobile phones exceeding internet connected PCs by 2003." The only point i can make here is that the IDC settlement with Nokia in regard to TDMA will be a HUGE driving force for IDC going forward. If Nokia is predicting 1 billion users by 2002-2003 (Angela Dean with Morgan Stanley is predicting 1.2 billion, a higher number it appears), then 80% of those users will continue to be TDMA/GSM centric. 3g users will comprise about 5-10% of that number, mainly due to Japan and the Nordic's States much faster push toward 3g. So, even 5% of 1 billion users equals 50 million 3g users in two years or less. There are currently that many CDMA narrowband users - and look what that low number of users did for Qualcomm. If you figure at least 50 million 3g users by 2002-2003, then the number of phones in production at that time to meet the forward looking demand would approximate 100 million (as the market would be growing at a 100%). IDC supplies the "engine and transmission"; even at $1 or less a phone, it produces significant income. Nevertheless, the bigger picture comes from the jump in TDMA/GSM users worldwide from the current 320 million to 750-800 million users. Of this number IDC will be receiving significant TDMA renewals based on the fact that the "upfront payments" IDC received from the big TDMA players (i.e., NEC, Matsushita, Mitsubishi, Oki, Denso, Bosch, Siemens, et.al.) will have been completely eaten through and IDC will be receiving per phone royalties. The royalties, averaged (which includes infra per phone maintenance)would equal at least $1.25 per phone. By 2002-2003, the "3g" working agreement IDC has with Nokia will CERTAINLY be completed (completion date we're told is toward the latter half of this year)and Nokia will also begin paying IDC royalties per TDMA based phone. It is probable IDC and Nokia will workout marketing agreements in regard to IDC's 3g WCDMA mobile ASIC which will help lessen the TDMA payments to IDC; either way IDC comes out with significant revenue production capability and earnings. IDC's 3g WCDMA ASIC will be for use in 3g phones in 2001 according to IDC (obviously being tested for use already; upgraded from the fixed based ASIC design). Again, moving from 350 million mobile users to over 1 billion in 2 years is Nokia's estimate. IDC, technically, doesn't need ERICY to make a bundle; nevertheless the ERICY settlement will only assist IDC in it's goal of becoming a major player. Remember, IDC was testing broadband devices in the late 80s - long before most major players today considered it even important." And... "I guess the main points I wanted to make with that last post was that (a) TDMA/GSM users will grow from the current 300 million to nearly 750-800 million in two years, (b) IDC's TDMA renewal base will grow 1800% more this year than last, (c) Due to the Nokia TDMA settlement with IDC, IDC will have effectively settled with nearly 1/3 of all TDMA/GSM users worldwide, (d) because of the pre-payments IDC received for the licensing of it's TDMA technology being eaten through 100% by 2001, then all new users, representing current licensees, in the year 2001 and beyond will be making payments to IDC based on per phone sales. Nearly all the Japanese players have licensed with IDC for TDMA based sales outside Japan (and some within Japan). Nearly all of DoKoMo (some have complained to me that I use the US spelling of DoCoMo)'s suppliers licensed with IDC; but DoKoMo itself has not come to full terms with IDC for PDC based sales within Japan, currently representing about 55 million TDMA users there. I-mode is a packetized TDMA based technology which NTT believes they can massmarket to the rest of Asia. This is an important fact because ALL TDMA/PDC based sales outside of Japan pay IDC royalties. The i-mode technology is a wonderful data based TDMA overlay feature (similar to HDR but without the speed). NEC was contemplating 6 million PDC users in Taiwan by this year utilizing i-mode. These would all qualify as an IDC renewal base. The same i-mode technology can be marketed by the Asians to Latin America where TDMA is popular. IDC has signed, as you know, with 80% of the suppliers to NTT's DoCoMo. The bottom line is that IDC gets paid for the TDMA "engine and transmission" while NTT gets its bananas and marketing muscle from the exploitation of i-mode and similar features."