InterDigital's 2Q exceeds expectations despite decline in royalties

InterDigital, which is garnering interest from Google (NASDAQ:GOOG) for its mobile patents, saw its shares jump nearly 6 percent in after-hours trading after reporting a second-quarter profit that exceeded the expectations of analysts.

The company announced a net income of $17.6 million, or 37 cents per share, which is significantly lower than $34.96 million in the second quarter 2010. While Interdigital's net income fell sharply, the figure still topped analysts' expectations. On average, three analysts polled by Thomson Reuters expected earnings of 36 cents per share for the second quarter.

Total revenues for the quarter decreased 23 percent to $69.87 million from $91.15 million in the same last year, and topped three Wall Street analysts' consensus estimate of $69.24 million. InderDigital said the decline came from a $16.5-million drop in patent licensing royalties that were somewhat offset by an increase in aggregate per-unit royalties of 11 percent.

"Our second quarter 2011 results reflect a number of factors," noted InterDigital's President and CEO William J. Merritt in a press release. "On the revenue side, we continued to see strong smartphone sales royalties from our key customers, offset by the expected decline in royalties from our Japanese customers, which is anticipated to be temporary, and a decline in our fixed fee royalties resulting from the expiration of our agreement with LG, with whom we continue to be in license renewal discussions. The expense side showed continued discipline in managing our costs even though our intellectual property enforcement costs increased in the quarter as a result of the recently filed ITC action. We ended the quarter with a very strong cash balance and continued optimism about the future prospects for the company."

Earlier this week, the patent company filed an infringement complaint with the U.S. International Trade Commission against Nokia, Huawei and ZTE, claiming that certain 3G wireless devices imported by these players infringe on seven of InterDigital's U.S. patents.

Several reports have pegged Google as being in talks with InterDigital about possibly purchasing the firm after InterDigital said it is exploring strategic options, including a possible sale.

InterDigital develops and licenses circuitry designs, software and wireless technologies. The company's stock has a market value of $1.95 billion, and the firm holds about 8,800 patents and has about 10,000 patent applications in process around the world. InterDigital retained Evercore Partners and Barclays Capital as its financial advisers for a possible transaction, but warned the activities may not result in a deal. The company also wouldn't provide a timetable for a possible transaction.

For more:
- see this RTTNews article
- see this release

Related articles:
How serious is Google about buying InterDigital?
Reports: Google interested in scooping up InterDigital
InterDigital explores putting itself up for sale

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