Tessera Technologies Inc. Message Board

InterDigital's (IDCC) stock had a nice run in the last two days breaking
out several key resistances at $35 and $36 on HEAVY VOLUME and will be
added on SP400 after market close. The company is probably one of the most
well-known royalty revenue companies. Its portfolio consists of
approximately 18,000 patents ranging from 2G and 3G to 4G LTE and 802.11
technologies. In June, InterDigital sold 1,700 of its 3G and 4G LTE
wireless patents to Intel for $375 million. According to company estimates,
it should be able to replace these 1,700 patents with new discoveries
within 18 months. Based on the rough price of $221,000 per patent,
InterDigital's patent portfolio alone could be worth around $4 billion if
it were sold (compared to its current market cap of $1.58 billion).
Although royalty revenue is only guaranteed if InterDigital's wireless
solutions are utilized, the company managed to produce $302 million in
royalty revenue in 2011 and appears to be destined for more patent sales in
the future. Addinionally, one more catalyst in place is IDCC's share
repurchase programs. The company's $200 million share repurchase program
announced on June 18 is the second share repurchase program announced this
year. The first was a $100 million program announced on May 4. These share
repurchases are extremely accretive to shareholder value at current prices.
The valuations for InterDigital are extremely attractive. InterDigital has
two publicly traded comps, Rambus (RMBS) and Tessera Technologies (TSRA).
On an EV/patent basis, InterDigital is trading at a significant discount to
its publicly traded comps. At the end of 2011, InterDigital had 19,500
patents. After the Intel transaction, IDCC has about 17,800 patents. IDCC
had $421 net cash at the end of Q1 plus $250 million for Intel transaction
gives it a net cash position of $671 million. With 45.9 million shares
outstanding times a share price of $28.63 leads to a market cap of $1.31
billion and an EV of $643 million. The market is currently valuing
InterDigital at about $36.1k a patent. Rambus has an EV of $526 million
with 1,386 patents and 1,059 patent applications pending. RMBS is trading
on an EV/patent basis of $215.1k. Tessera has 1,736 patents with an EV of
$288 million for an EV/patent price of $165.9k a patent. Taking Tessera's
low multiple of $165.9k/patent leads to an EV of $2.95 billion for IDCC.
Adding back net cash of $671 million leads to a market cap of $3.62 billion
or a price of about $79/share. There have been a number of notable
transactions done on the private market that have received a lot of press
including IDCC's own transaction with Intel. Other transactions have
included Tessera's purchase of 73 patents for $35 million from MoSys for a
price of $479k/patent. The Microsoft (MSFT)/Facebook (FB) transaction led
to a price per patent of $846k/patent. The Microsoft/AOL (AOL) deal was
done at $1.19 million/patent. A microcap, Tegal (TGAL), did a 35 patent
transaction for about $114k/patent. With transactions per patent ranging
between $114k/patent and $1.19 million/patent, finding a good estimate for
IDCC's patents may be a fruitless exercise. However, assuming they are
worth at the lower end of private market transactions provides significant
upside. For example, taking Tegal's $114k/patent transaction an applying it
to IDCC suggests an EV of $2.0 billion. Adding back net cash of $671
million suggests an equity price of about $58/share. On an absolute basis,
there is significant upside as well. IDCC is expected to record revenues of
$277 million this year. With about $25 million in depreciation and
amortization expenses and $65 million in patent development costs, leaving
costs of $70 million consisting of SG&A and patent administration and
licensing. If the company stopped development of new patents and simply
worked on licensing its current portfolio, the company would generate about
$207 million in EBITDA this year. With a tax rate of 30%, that would leave
$145 million for shareholders. A 10% discount rate suggests an EV of about
$1.45 billion. With cash, this suggests a market cap of $2.12 billion and a
per share price of about $46/share. Notably, this is a very rough and
inexact estimate, but this does provide a data point. Industry growth is
expected to be strong as worldwide handset shipments should continue to
rise and the 4G/LTE trends. THIS COMPANY IS EXTREMELLY UNDERVALUED !!!! Buy
with both HANDS !!!