UPDATE: InterDigital Explores Strategic Options
Including SaleLast update: 7/19/2011 10:23:05 AM
(Updates throughout with additional details and analyst comments.)
--InterDigital says it's exploring strategic alternatives, including a possible sale --Company hopes to take advantage of soaring demand and prices for patents, shown by the Nortel Networks auction --Potential bidders could include companies involved in the Nortel bidding
By Shara Tibken
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)-InterDigital Inc. (IDCC) said it is exploring its strategic alternatives, including a possible sale of the wireless technology company, as it seeks to take advantage of strong demand for patents in the wake of the Nortel Networks Corp. auction. Shares, which were flat in the year-to-date through Monday's close, recently soared 25% to $52.09. The price for Nortel intellectual property offered by a six-company consortium--five times Google Inc.'s (GOOG) opening bid--showed the rising value of patents in the increasingly competitive and litigious wireless business. It also underscored the determination of companies like Apple Inc. (AAPL), Microsoft Corp. (MSFT) and Research In Motion Ltd. (RIMM, RIM.T) to gather legal ammunition for potential lawsuits and outflank Google, whose Android software has become a dominant force in the smartphone market. InterDigital develops and licenses wireless technology--including 3G and the increasingly popular 4G LTE--to companies such as Apple, RIM, Samsung Electronics Co. Ltd (SSNHY, 005930.SE) and HTC Corp. (HTCXF, 2498.TW). It owned over 18,000 patents as of the end of 2010 and has licensed its 3G technology to about 50% of the market. Chairman Terry Clontz said Tuesday that due to the substantial increase in the value of intellectual property to major mobile communications companies, the board "believes it is an appropriate time to explore potential strategic options that may enhance shareholder value." He also reiterated his optimism in InterDigital's current business plan. InterDigital wasn't immediately available to comment further. The company in May had projected second-quarter revenue below analysts' estimates on expectations that revenue from Japan would decline. The company, which in April reported first-quarter earnings dropped 52% and revenue declined 32%, plans to release its second-quarter results July 27. M Partners analyst Ron Shuttleworth, who boosted his price target on InterDigital by 20% to $65.50 following the Nortel auction, said many of the companies involved in the Nortel auction, or any interested in 4G LTE technology, could be potential bidders for InterDigital. "Patents and royalty programs are becoming more important and more valuable to the future," Shuttleworth said. "Everyone is suing everybody, and some guys feel as though they need powder in the keg to protect themselves or go after the other guys. That's become a theme, and the Nortel patent auction has reset the bar in terms of how valuable these essential patents are." Apple, Microsoft, RIM, EMC Corp. (EMC), L.M. Ericsson Telephone Co. (ERIC, ERIC-B.SK) and Sony Corp. (SNE, 6758.TO) made up the consortium that won Nortel's patents. They drove up the bidding at a four-day bankruptcy auction where they vied with Google, chip giant Intel Corp. (INTC) and RPX Corp. (RPXC). At 6,000 patents and patent applications, Nortel's was the largest intellectual property portfolio ever sold. The starting offer of $900 million was considered remarkable. The final price was a triumph for Nortel's strategy of selling its operating businesses first but holding back its patents to be sold separately. InterDigital said Tuesday it has hired Evercore Partners Inc. (EVR) and Barclays PLC (BCS) as advisers for the strategic review process. The company said it hasn't set a timetable for completion of the review and there's no guarantee it will result in a transaction. InterDigital said it won't comment further about the process unless a transaction is approved by the board or the review process is complete. -By Shara Tibken, Dow Jones Newswires
"The world is a dangerous place to live�not because of the people who are evil, but because of the people who don't do anything about it." �Albert Einstein
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