That's about a 5.6 billion valuation, and it could go higher. IDCC owns 16% of all the LTE patents out there, many of them core to LTE technology. Apple is intrducing its 4G LTE phone in 2012, and will probably sell upwards of 500 million of them. Estimates are that IDCC's patents could be worth between 3 and 10 billion to Apple. And how much are those patents worth in crippling Android? I think Google has no choice but to trump Apple in this bidding war, even though the war hasn't begun yet. So that's why I think $127 is a fllor. I actually think it could go to $140-150.
This is one of Bloomberg News headlines this morning under AAPL:
"Nokia’s China Dominance Under Threat as Sales Plummet on Android Handsets"
By Diana ben-Aaron - Jul 22, 2011 3:53 AM ET
To me, it looks like that the Android phones are everywhere and Apple may want to outbid Google for Idcc. By using just one quarter of it's earnings to buy Idcc, it's worth for it. Don't you think so?!
If IDCC were worth that much, the stock price would be there already. This is not some small-cap "undiscovered gem". Add 20-30% to the bump it got after announcing it was for sale and that's the takeout price.
"If IDCC were worth that much, the stock price would be there already."
Loufah, the stock price reflects the company's value as an earnings play, not an asset play. Wall Street valued IDCC based on its revenue growth and earnings power as a licensing company. But how much these assets are worth in a multi-billion dollar competition between Apple, Google, and others, is quite another matter. How much revenue were the $4.5 billion worth of patents generating for Nokia? Probably not much, but guess what: that was never even discussed by analysts, because it didn't matter. And neither does it now.
Why do you think the lawyers at IDCC put this up for sale? They relasized that the Nokia sale was a game changer on their valuation, and they are smart enough and greedy enough to capitalize on it right now, to our benefit!
An "undiscovered gem" is exactly what IDCC is.
Obviously Carl Icahn had never heard of it or he wouldn't be screwing with a vastly inferior Motorola right now. Except for a couple of boutique investment firms no one had heard of InterDigital prior to the financing to get prepared for the Nortel auction.
Now that the Apple, Microsoft consortium has paid $4.5B for Nortel's patents people across Wall Street are FINALLY asking what InterDigital's much more impressive patent portfolio is worth. You can bet Google, which got shut out of Nortel, knows and badly wants to get hold of it.
If Nortel patents were worth $4.5B, then ours are easily worth $6.0B to a very motivated buyer, especially with Apple hovering in the background.
Pricing true value of stock's worth is not an easy task to do for retail investors like us. The true value is determined by the buyer and IDCC but for us to make a wild guess we can only make a wild estimate with reference to prior deals like Nortel's patent sale. So, if Nortel's patents fetch 4.5B, IDCC patents which is more(close to 2x) than Nortel's can fetch more. Also, for consideration is the pricing based upon selling patents only or the whole company ? If the whole company will be sold forward income is taken into consideration and will be much much more. IMHO $127 is low estimate.
The Jeffries analyst said idcc's patents could be worth anywhere from 3-10 billion. Then you have the 500 million in cash. Then you have the actual engineers who make and are still making valuable patents. And we still have the court case relating to Nokia which if favorable (most people believe it will be) should be worth around 500 million. For math sake, let's assume the engineers alone are worth a measly 500 million. Add all these factors to the patent's value range of the Jeffries analyst and you get a range of 4.5 billion to 11.5 billion. And I'm sure I low balled the value of the engineers. I have no experience in quantifying people lol. That gives us a share price of $90 to $230. Then there is the possibility of the bidding war, since this technology will have a huge influence on the tech world once it gets bought by a vendor. Let's say the max bid is double the top range I gave of 11.5 billion. That means in a bidding war, IDCC could be worth 23 billion dollars, which is huge, but if you read the transcripts from the past 2 years, that is where the company was heading anyway. This gives us a low range of $90 and a top range of $460. A big range, but you these companies have lots of cash and need lots of patents.
well I think the $23 billion valuation is farcical, but 5-10 billion isn't. Google cannot afford to lose this one. What's left? Qualcomm? Not for sale. Motorola? They don't have what IDCC has. Whomever controls the IDCC patent portfolio is going to have huge leverage over all phone manufacturers going forward. I hope GOOG wins it, but only at the right price. If they win it I will buy GOOG and AAPL. If AAPL wins it, I will only buy AAPL. Of course, we don't even know who else may step into this, like a Qualcomm or a Samsung.
Based on this article:
I get numbers of between $215 and $225/share. And to think there are shorts still willing to step up to the plate on this one. Astounding how crazy some people can be.