Interdigital Communications Corporation (IDCC) is a King of Prussia, Pa based mid-cap company that thrives primarily on income from its intellectual property (IP) portfolio spanning 2G and 3G wireless technologies. Before I present my outlook on the company, let me throw in some historic perspective.
International Mobile Machines Corporation (IMM), as IDCC was originally known, had a visionary beginning. Sherwin Seligsohn wanted to be ‘mobile’. You may question, “What is special about that? All of us are mobile today.” But, this was back in 1968 when he visualized the concept of a portable data machine and voice phone. It is easy to see that the man was 30 years ahead of his time. Thus began the saga of IMM in 1972 after he presented the world’s first handheld analog prototype. Seligsohn’s company sold these analog phones to rural markets and developing countries. While the world was focusing on analog cellular technology, IMM engineers started their investigation of Time Division Multiple Access (TDMA) digital cellular concepts. For the uninitiated, GSM employs a lot of TDMA concepts.
IMM, amidst all the exciting futuristic work, went public in 1981. It decided not to make cell phones or chipsets and chose the IP licensing model instead hoping to thrive from the high margins. It has since been filing patents in every nook and corner of the world. It also sold its UltraPhone, a WLL phone during the 80’s and early 90’s. This decision to adapt an IP licensing model, in hindsight, may have a lot to do with the company not being in the forefront of wireless so far.
In 1991, IMM acquired SCS Mobilecom Inc. and SCS Telecom Inc. and the new entity assumed the name we know today. The synergy came from the complementary Code Division Multiple Access (CDMA) technology patents that SCS had. This move essentially guaranteed Interdigital an IP stamp in most 2G and 3G technologies. But its image as an IP shark capitalizing on its position has worked against IDCC. In most cases, IDCC waited until the device came to market and then took legal action against the vendors. This model antagonized most of its potential partners when it decided to re-enter the design business.
Its decision to focus on licensing has definitely paid off in millions of dollars but it has not met with the success you would expect a company with this profile to have. Besides, its revenue flow has been erratic at best. Contrast with Qualcomm which in the 90’S had a similar position. Qualcomm’s success rests on the fact that it not only pioneered CDMA but also successfully marketed the benefits of the technology. More importantly, though a good add-on, IP licensing was never Qualcomm’s sustenance model.
With its head-start over the mobile world and the ideas that were initially generated, I am almost saddened that this venture has not hit it as big as some of the others. To a certain extent, it does speak for the volatility of the IP business. The company perhaps also lost steam with its single-minded IP pursuits in the past. On the other hand, with the 3G market taking off, I can see some of the company’s efforts fructify on the IP front. Of course, its longer-term sustenance by itself will hinge on the success of its latest development initiative, the 2G-3G ASIC business. It is always better late than never.
In the sequels, I will look into the reasons for my interest in this company today. Want a clue? An Apple a quarter keeps misfortunes away!
This segment is a part in the series : Interdigital