Shares of wireless patent storehouse Interdigital Communications (IDCC) are up $6.82, or almost 30%, at $29.70 after the company announced it sold 1,700 patents to Intel (INTC) coveting a variety of wireless technologies, including some pertaining to the 4G networking standard called “long term evolution,” or LTE, for $375 million.
The company announced simultaneously it is doubling a share repurchase authorization, announced back in May, to $200 million.
In a note to clients, Bernstein Research’s Stacy Rasgon, who has a Market Perform rating on Intel stock, write that the purchase prices seems to him relatively low:
Price per patent paid (~$220K) seems materially lower than valuations from other recent IP buys (e.g. Nortel, Motorola, etc), possibly lending some credence to reports over the last year that Interdigital has had some difficulties meeting potential purchaser expectations on the value of their portfolio, but also suggesting Intel has probably gotten a good buy [...] For instance, Nortel recently sold ~6000 wireless patents to a consortium of buyers for $4.5B (or about $750K/patent). And Google’s purchase of Motorola for $12.5B, if ascribing all the value to only the ~17K-strong patent portfolio (e.g. ignoring any potential value from the hardware business or patent applications) would value each patent at ~$735K.
The patent sale is prompting some positive remarks about the patent holdings of other tech firms.
Deutsche Bank’s Kai Korschelt, who has a Buy rating on shares of Alcatel-Lucent (ALU), and a �2 price target on its ordinary shares, this afternoon writes that the price is actually within a wide spectrum of historical prices, and that it highlights the value in Alcatel’s portfolio:
The transaction implies proceeds per patent of around $200K, which is inline with a 2011-2012 transaction range of $130K to $1.32 million per patent. We recall that ALU has mandated RPX as a strategic partner to market its IP/patent portfolio of ~29K existing plus future patents to interested parties. We believe ALU could generate meaningful proceeds from monetizing its IP/patents in H212 which should help to further de-leverage its balance sheet (Q112 net cash �772m/�91m net debt after adjusting for cash trapped in its Chinese JV) [...] If we assume RPX manages to license/sell between 1,000 and 3,000 of ALU’s patents close to historic monetization levels of $130K to $1.32 million per patent, then we estimate a (very wide) range of potential proceeds between ~$130m up to $3.5+bn. We believe any sizeable triple-digit $m proceeds would be a positive catalyst for the stock.
Shares of ALU today rose 0.4% to �1.24 in Paris trading, while the American Depository Receipts are currently up 2 cents, or 1%, at $1.58.
Likewise, Capstone Investments’ Jeff Schreiner this afternoon reiterates a Buy rating on shares of chip maker MIPS Technology (MIPS), and an $8 price target, writing that,
We believe today’s announced patent sales between IDCC/INTC demonstrates continued appetite for the acquisition of IP within semiconductor market. Our back of the envelope calculation suggests INTC paid ~221K/patent based upon the ~$375 million paid to IDCC for ~1,700 patents [�] Based upon its current portfolio of ~580 patents, we believe utilizing terms of IDCC/INTC, MIPS could receive ~2.30/share for its IP portfolio. This figure is slightly higher than the ~$2/share we have assumed within our DCF [discounted cash flow] valuation over the last few months. It is our understanding MIPS holds core IP relating to RISC processors.
MIPS shares today are down a penny at $6.80.
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