Please hover over a table or graph with your mouse.

close
EQUITY RESEARCH
Technology | U.S. Wireless Equipment | 12 November 2012
INTERDIGITAL, INC.
Japan Based Licensees Aide 4Q12 Guidance
The ongoing market consolidation around Apple and Samsung and corresponding
decline in RIM and HTC continue to pressure revenues.
Better unit volumes from Japan
based per unit licensees, however, aide 4Q guidance and are a modest, though likely
unsustainable positive. Going forward, stabilization in core licensing with additional
contract wins should be the primary driver of long term earnings growth, in our view.
Management guides F4Q revenues to $62-$64 million:
This does not include future
patent asset sales or pending arbitration. Guidance of $62-64M ($61M from current
patent royalties) is down ~19% YoY, though slightly exceeds our ~$60M estimate and is
up from 3Q levels, ex-sale. Despite ongoing weakness at RIM/HTC, IDCC cited better
volume at Japanese licensees specifically for the sequential uptick in F4Q12.
Patent monetization strategy remains in focus:
IDCC’s newly created business unit to
develop and acquire patent technology via internal/external sourcing (partnerships)
would reduce opex and further enhance the strategy to monetize the patent portfolio
and diversify the revenue stream. We expect further clarity on this initiative into
YE/2013.
Key fixed/per unit payment contract renewal and court case on the horizon:
Samsung (and RIM) contracts expire at the end of the year; HTC in the near future.
We
expect news surrounding any contract renewal development as well as the pending
arbitration and court case with Nokia and others to take center stage into 2013.
We tweak EPS to ~$0.55 (ex sale) in ’12; $0.64 in ’13, but top line remains the focus:
This assumes ongoing per unit weakness from core licensees. We believe visibility into
both contract renewals and patent sales is limited. We retain our target of $25 (~17x
new CY13 EPS of $0.64 plus ~$14 per share in net cash), based on our SoTP analysis.
IDCC: Quarterly and Annual EPS (USD)
2011
2012
2013
Change y/y
FY Dec
Actual
Old
New
Cons
Old
New
Cons
2012
2013
Q1
0.51A
0.24A
0.24A
0.24A
N/A
N/A
-0.41E
-53%
N/A
Q2
0.37A
0.22A
0.22A
0.22A
N/A
N/A
-0.27E
-41%
N/A
Q3
0.57A
5.56A
5.56A
5.56A
N/A
N/A
-0.37E
875%
N/A
Q4
0.49A
0.06E
0.07E
-0.02E
N/A
N/A
-0.27E
-86%
N/A
Year
1.94A
6.00E
6.02E
5.91E
0.60E
0.64E
-0.82E
210%
-89%
P/E
21.2
6.8
64.1
Source: Barclays Research.
Consensus numbers are from Thomson Reuters
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered
in its research reports. As a result, investors should be aware that the firm may have a conflict of interest
that could affect the objectivity of this report.
Investors should consider this report as only a single factor in making their investment decision.
PLEASE SEE ANALYST(S) CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 4.
Stock Rating
EQUAL WEIGHT
Unchanged
Industry View
NEUTRAL
Unchanged
Price Target
USD 25.00
Unchanged
Price (09-Nov-2012)
USD 41.19
Potential Upside/Downside
-39%
Tickers
IDCC
Market Cap (USD mn)
1687
Shares Outstanding (mn)
40.95
Free Float (%)
98.64
52 Wk Avg Daily Volume (mn)
0.9
Dividend Yield (%)
1.0
Return on Equity TTM (%)
54.95
Current BVPS (USD)
13.85
Source: FactSet Fundamentals
Price Performance
Exchange-Nasdaq
52 Week range
USD 51.40-22.37
Jan- 12
Apr- 12
Jul- 12
Oct- 12
20
30
40
50
Link to Barclays Live for interactive charting
U.S. Wireless Equipment
Jeff Kvaal
1.212.526.2216
jeffrey.kvaal@barclays.com
BCI, New York
Luke Labella
1.212.526.8682
luke.labella@barclays.com
BCI, New York