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

To: Benchman who wrote (4148)	4/17/2000 11:33:00 PM
From: Gus	Read Replies (1) \| Respond to of 5195

They're still sorting out the CYAs (cover ye'r ass) memos from the finger-pointing memos over at Motorola regarding Iridium , but from what has been reported, the following is clear: 1) Iridium started out as a cutting-edge satellite network that was designed to take advantage of the deregulation of telecommunications globally. The planning stage took about two decades, if I remember correctly. 2) One enduring legacy of Iridium that survives and is being utilized by the tight-knit and clubby commercial space community (including Globalstar) is the set of cost-effective satellite manufacturing processes that Motorola developed that allowed them to reduce the number of satellites in the network from the original 77 (thus the name Iridium, the 77th element) to 66. The logistical feat required to fund the project and assemble the international agreements required to build the ground control support network are also portable skills that will survive the debacle. Going by his resume, the new CEO was intimately involved in this part of the process and he probably has the Rolodex to prove it to go with his fluency in Russian, Polish and conversational German. 3) The business schools will probably end up using Iridium as a case study of how overly-rigid technology choices and poor marketing can implode quickly in the face of rapidly changing events such as the Asian contagion that not only reduced the addressable market for satellite telephony, but amplified the growth of competing technologies like mobile wireless with superior cost-benefits. One fatal flaw in the Iridium design was the way calls were transferred from satellite to satellite effectively cutting out the carriers from the meat of their origination and termination fee business. I believe Iridium ended up with only 50,000 subscribers. One thing that may get lost in the lousy price action is the real significance of the fact that somebody from Motorola, which won the 1995 pre-Markman jury trial against IDC, would even consider working for IDC if its TDMA patents were as worthless as Motorola's lawyers portrayed them to be in that trial. Keep in mind that trial was notable for the way the judge repeatedly admonished the lawyers on both sides for their bewildering conduct in front of a jury already befuddled by the kind of arcane and technical arguments that are now routinely handled by a Judge or a Special Master in the Markman phase of all patent trials -- claim construction as a matter of law to be decided by the judge. The Motorola trial was decided in 1995. Markman 1 and Markman2 were Supreme Court and CAFC decisions that were handed down in 1996 and 1997. The Motorola-IDC JMOL (Joint Motion of Leave), which reinstated 3 of the 24 claims denied by the jury, was decided in 1997. The controlling case law in patent litigation today is Cybor vs Fastech (the role of the de novo appeal) which was decided in 1998. Given the increased value of patents -- the royalty business went from $5 billion globally in 1990 to $100 billion globally in 1999 -- it probably won't be the last patent decision that may affect IDC's case. In any event, the important thing is that IDC now has a CEO with an attractive options package and with something to prove. The IDC website has a transcript of the Q&A where he clearly acknowledged that the Nokia relationship is going to be the starting point of his efforts. And why not? The Nokia ecosystem is clearly superior to the Ericsson or Motorola or Qualcomm ecosystem because it allows its suppliers, the carriers and their distributors to make money. The Wintel ecosystem is the apt comparison for the way Nokia is turning transactions into relationships. This is a considerable feat for a country with a population of only 5 million people. As an aside, this is an intriguing achievement for those following the process of cultural osmosis i.e., the Finnish cultural trait best characterized as a refreshing detachment from personal wealth especially after the way Nokia immersed itself in the Fibonacci-sequence growth of wireless in the 90s. Nokia must account for at least 80% of the total capitalization of Finland's stock market by now! Presumably, Howard Goldberg now goes back to being President of ITC, the holding company for IDC's TDMA and CDMA patents, and he can concentrate on the ongoing trial and the negotiations going on regarding IDC's nascent SoC business. We'll see how it all works out soon enough. IDC has about 53-55 million shares outstanding, $85 million cash, basically no debt, the K&P land and building, and some real chips to play. The ongoing trial only concerns IDC's TDMA patents and it currently looks to me like a fight to the finish. Until the jury trial progresses to the point where a probable winner can be gleaned and trigger a new round of licensees, IDC will have to make do with the rapidly increasing recurring royalty stream from the TDMA/GSM/PDC sales of 22 licensees and the $3 million a quarter it receives from Nokia for engineering support. As you know, Nokia is aiming to increase the annual handset upgrade cycle from 20-30% globally to 60-70% over the next few years and that can only mean more TDMA/GSM/PDC royalties for IDC especially since a majority of those upfront payments have been depleted by now. IDC's CDMA patent portfolio, on the other hand, can only benefit from being plugged into the numerous real-world WCDMA trials going on around the world and the degree to which they can form the necessary foundry relationships to get their ASICs business off the ground. IDC is still a spec because of the legal uncertainty and the industry heavy-lifting required to shape the demand for 3g wireless data. The schedule for the close of the Markman phase has already been posted alongside the schedule for ITU ratification of the specifications of the 3G family of 5 standards so any independent-minded investor can easily verify for himself or herself the facts of this issue and make up his or her own mind without falling prey to the fanatical groupthink that tends to characterize the message boards with less critical and less diligent investors.