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InterDigital (IDCC) Secures Favorable Verdict Against Lenovo

InterDigital, Inc. IDCC recently secured a favorable verdict from UK’s High Court for its longstanding licensing dispute against Lenovo. The litigation is based on the fair, reasonable and non-discriminatory (FRAND) terms of a license for InterDigital's patents and has featured five separate trials since the lawsuit was first filed against Lenovo in 2019.

Per the court ruling, the China-based technology firm is liable to pay about $138.7 million as a “lumpsum” compensation for all the past and future sales of mobile devices from 2007 until the end of 2023. The court further observed that previous offers of $337 million for a six-year license to InterDigital’s portfolio of 3G, 4G and 5G patents were not made on FRAND terms and it will determine in due course of time whether any additional interest payments were required.

The verdict reinforces InterDigital’s patent licensing rights and is likely to thwart any potential breaches in the future. Although the company has welcomed the favorable verdict, it intends to appeal against certain aspects of the decision that it feels do not truly reflect its licensing program.

InterDigital’s commitment to licensing its broad portfolio of technologies to wireless terminal equipment makers, which allows it to expand its core market capability, is laudable. It has leading companies, such as Huawei, Samsung, LG and Apple, under its licensing agreements. Consequently, the company expects to generate solid recurring revenues from the patent licensing business in the forthcoming quarters as well.

InterDigital’s global footprint, diversified product portfolio and ability to penetrate different markets are impressive. Apart from the company’s strong portfolio of wireless technology solutions, the addition of technologies related to sensors, user interface and video to its offerings is likely to drive significant value, considering the massive size of the market it licenses. Furthermore, the company remains committed to pursuing acquisitions to drive its product portfolio and boost organic growth.

The company is focused on pursuing agreements with unlicensed customers in the handset and consumer electronics markets. InterDigital aims to become a leading designer and developer of technology solutions and innovation for the mobile industry, IoT and allied technology areas by leveraging its research and development capabilities, technological know-how and rich industry experience. At the same time, it intends to enhance its licensing revenue base by adding licensees and expanding into adjacent technology areas that align with its intellectual property position.

Additionally, more and more companies are increasingly offering the work-from-home option to employees to ensure their safety and well-being. Several firms are also providing a secure and connected workplace setup through quick onboarding and enablement services to support the seamless continuity of businesses and enable employees to fulfill their professional obligations. This, in turn, is likely to create new revenue-generating opportunities for InterDigital, as humans become solely dependent on the digital platform to stay connected not only for their professional lives but also for online education, shopping, dining and entertainment.

The stock has gained 15.1% over the past year against the industry’s decline of 17.3%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

InterDigital currently carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Key Picks

Arista Networks, Inc. ANET, sporting a Zacks Rank #1, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 17.5% and delivered an earnings surprise of 12.7%, on average, in the trailing four quarters.

It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200- and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.

Juniper Networks, Inc. JNPR carries a Zacks Rank #2 (Buy). It has a long-term earnings growth expectation of 7% and delivered an earnings surprise of 1.6%, on average, in the trailing four quarters.

Juniper is leveraging the 400-gig cycle to capture hyperscale switching opportunities inside the data center. The company is set to capitalize on the increasing demand for data center virtualization, cloud computing and mobile traffic packet/optical convergence.

Deutsche Telekom AG DTEGY, carrying a Zacks Rank #2, is likely to benefit from the accretive post-merger integration of T-Mobile US Inc. and Sprite in the United States, in which it owns about 43% stake. The removal of forced cable TV access in multiple dwelling units in Germany through telecom legislation is likely to help Deutsche Telekom expand its broadband market.

Moreover, an aggressive fiber rollout strategy across the country is expected to augment its domestic market hold. The Zacks Consensus Estimate for current-year earnings for Deutsche Telekom has been revised 21.8% upward over the past year. It has a VGM Score of B and a long-term earnings growth expectation of 15.7%. The stock has gained 38% in the past year.

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