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Tessera Technologies Inc. Message Board

  • patentsaddicted patentsaddicted Sep 28, 2012 4:58 AM Flag

    InterDigital's (IDCC) patent portfolio alone could be worth around $4 billion - more than $79/share ( currently trading at $36.9 )

    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 !!!

37.30+0.15(+0.40%)11:40 AMEDT