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

To: Bux who wrote (3440)	1/19/2000 11:54:00 PM
From: Gus	Read Replies (1) \| Respond to of 5195

Get a grip on reality and relax Bux. Understand that the core group of IDC shareholders who bought in the single digits and the teens are exploiting opportunities in the network of networks architecture theme. Fixed and mobile wireless are obviously only part of that theme. You will only end up making a fool of yourself like the last time when you made this classic woofer: Wow! I wasn't even planning on holding the Q that long. Even so, it's generally not the longevity of the patents that determine the period that royalties are due but the specifics of the license contract. I know these contracts are not in the public domain but I understand Nokia, Ericsson, Samsung, Motorola and all other current licensees have signed contracts that obligate them to pay Qualcomm royalties if they use Qualcomm's CDMA innovations ever, even after the patents have expired. But that's probably a mute point since the box makers will be dependent upon new refinements and advances that Q is developing and patenting right now. ragingbull.com (message 6332 on the RB QCOM board) It sounds more stupid over time, huh? The reality is that at the end of 1999, TDMA/GSM ended with an global installed base of about 400 million subscribers while CDMA ended up with a global installed base of O-N-L-Y 42-50 million subscribers, 3 million in Japan and 24 million in South Korea. Oh, and wasn't that the South Koreans who were griping about the excessive royalty fees of QCOM just the other day? Your inability to accept these facts doesn't change that unavoidable reality. Guess what? Supporting those 400 million TDMA/GSM subscribers are $200 billion worth of infrastructure. Guess what? Who do you think is supporting the use of the 3G Patent Platform G-U-I-D-E-L-I-N-E-S to start reducing the costs of 2G and start containing 3G royalties? Ahmmm....could it be the manufacturers and the carriers coalescing around the ITU goal of increasing global telephone density to 20%? The risks and rewards for IDC are simple and do not necessarily involve QCOM in the near term because QCOM is NOT a TDMA/GSM player. Again, ground yourself in reality, there are 400 million TDMA/GSM subscribers today with expensive infrastructure to support them. 22 licensees have paid over $250 million in upfront payments to IDC since 1997 with a recurring royalty stream of about $3 million/quarter as of the 9/30/99 quarter. As those upfront payments are used up, a per phone royalty of a $1.25/TDMA/GSM unit starts to kick in providing IDC with a high-margin revenue stream to fund fixed wireless and 3G. Of the 550 million phones to be sold from 2000 to 2002, if you assume the following share of market percentages, even a prudent person can get a realistic sense of the opportunity for IDC which should have total shares out of 53-54 million (49 million + 3 million stock options and 1.5 million presumably for the new CEO so Howard Goldberg can go back to being President of ITC - the corporate shell sheltering IDC's patents): 25% CDMA - 75% TDMA/GSM=413 million potential licensees 50% CDMA - 50% TDMA/GSM=275 million potential licensees 75% CDMA - 25% TMDA/GSM=138 million potential licensees 1) IDC currently has 22 out of a 60-65 possible licensees. 2) The most optimistic estimate is for 3GCDMA (since QCOM only has 10% of the market) to get 50% in 2005. 3) Motorola is assuming that the transition to 3G (WCDMA or CDMA2000) will happen closer to 2010. Before you diss Motorola, look at Aspira and its partnership with Cisco. Also look at Cisco and the IP network it is building in Switzerland with Siemens. QCOM is betting the company on royalties and ASICs on narrowband 2G, the HDR overlay and 3G CDMA2000. IDC has fixed and mobile TDMA/GSM and fixed and mobile 3G WCDMA. Is that so hard to understand? QCOM only has 10% share of the market and is playing hardball with its patents, what makes you think that the rest of industry wants to deal with QCOM on TDMA/GSM too? Like Jim and Darrell said, the TDMA/GSM-WCDMA air-interface is the most lucrative part of the transition. No matter how hard you try to spin it, Nokia didn't go to QCOM for that despite the fact that Nokia was already a licensee for QCOM's 2G CDMA. It went to IDC after a German court and the Swedish Patent Office validated IDC's patent. Let me end with what is in the public domain regarding the IDC and QCOM patent situation. From QCOM's own 10-K (page 14-15): Ericsson, Motorola and InterDigital have each advised the TIA that they hold patent rights in technology embodied in IS-95. Lucent and OKI Electric have claimed patent rights in IS-96. In accordance with TIA guidelines, each company has confirmed to the TIA that it is willing to grant licenses under its rights on reasonable and non-discriminatory terms. In connection with the settlement and dismissal of the Company's patent litigation with InterDigital, the Company received, among other rights, a fully-paid, royalty free license to use and to sublicense the use of those patents claimed by InterDigital to be essential to IS-95. If the Company and other product manufacturers are required to obtain additional licenses and/or pay royalties to one or more patent holders, this could have a material adverse effect on the commercial implementation of the Company's CDMA technology. Now, don't try to chicken out by saying that is a boilerplate disclaimer, because then I'm really going to induce you to make a fool out of yourself. A-G-A-I-N. QCOM and IDC are two fine American companies with different opportunities with only a narrow area of potential conflict. Reasonable people can agree to disagree about that.