If you are considering becoming a 1M/1M premium member and would like to join our mailing list to receive ongoing information, please sign up here.

Subscribe to our Feed

Interdigital: The Apple deal

Posted on Friday, Dec 28th 2007

By Vijay Nagarajan, Guest Author

So far, I have presented an argument for why Interdigital stands to gain from the iPhone. Early this fall, the company signed a 7-year licensing agreement with Apple. Here is my interpretation of the license –

  • The license is retro-active to the day one of the iPhone. This implies that Apple is also paying for 2G technology licensing. So, the $2 million increase in its guidance around September (which analysts speculated was due to the Apple deal) was from licensing 2G technology alone.
  • Interdigital has traditionally used the flat-licensing fee model. This has perhaps led analysts to interpolate the $2 million. They now speculate that the company’s earnings per quarter from Apple will be capped at $2 million thus yielding $56 million over the 7-years of the license agreement. Fair enough! But the catch is that with the 3G iPhone, Interdigital not only gets a flat licensing fee (per its IP licensing model) but also makes a PER UNIT ROYALTY for every Infineon platform sold. Besides, the licensing fee for 3G is also likely to be higher as it encompasses both 2G and 3G IP.
  • Here are some rudimentary calculations I came up with. If Apple gets 1% market share and sells one 3G iPhone for two 2G iPhones it sells in 2008, then at $2 per handset, Interdigital can make $8 million for the year just out of handset sales. This number can only increase with the 3G sales looking to exponentially increase in 2009 and 2010. So, for now, it is hard for me to believe that the Apple deal is worth only $56 million for Interdigital.

Well, that is my speculation! I will closely watch the company’s quarterly numbers and of course, the release of the next iPhone to see if my analysis is right.

This segment is a part in the series : Interdigital

Hacker News
() Comments

Featured Videos


[…] on Qualcomm acquiring it. Check out the posts The Infineon Alliance, Inside the iPhone, and The Apple Deal which look at how it is going to reap the benefits from the boom in the 3G […]

InterDigital: Risky Play with Huge Potential Upside - Sramana Mitra on Strategy Monday, March 10, 2008 at 9:21 AM PT

[…] […]

There may be some “Gold” in the 3G iPhone « iPhone in Asia 到达中国和亚洲 Tuesday, April 8, 2008 at 4:25 PM PT

[…] has a seven-year licensing deal with Apple. But apart from this, its Infineon alliance gets it royalties for the Infineon platform in the 3G […]

Semiconductor IP Players: IDCC, Tessera - Sramana Mitra on Strategy Friday, August 8, 2008 at 9:32 AM PT

[…] (IDCC) is another IP licensing company that is a strong beneficiary of the iPhone due to its licensing deal with Apple and its Infineon alliance. Suggested reading: Vijay’s Valuation Series, stock analysis from Q407, […]

Top 10 Semiconductor Stocks - Sramana Mitra on Strategy Wednesday, August 13, 2008 at 8:51 AM PT