InterDigital, Inc.
Q4 2013 Earnings Call Transcript
Published:
- Operator:
- Good day. And welcome to the InterDigital, Fourth Quarter Earnings Conference Call. Today’s conference is being recorded. At this time I would like to turn the conference over to Mr. Patrick Van de Wille. Please go ahead sir.
- Patrick Van de Wille:
- Thank you, Justin. Good morning, everyone and welcome to InterDigital’s fourth quarter 2013 earnings conference call. With me this morning are Bill Merritt, our President and CEO and Rich Brezski, our CFO. Consistent with the last quarter’s call, we’ll offer some highlights about the quarter and our outlook and we’ll open the call up for questions. Before we begin our remarks, I need to remind you that in this call, we will make forward-looking statements regarding our current beliefs, plans and expectations which are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results and events to differ materially from results and events contemplated by such forward-looking statements. These risks and uncertainties include those set forth in our earnings release published this morning and those details from time to time and our other filings with the Securities and Exchange Commission. These forward-looking statements are made only as of the date hereof, and except as required by law, we undertake no obligation to update or revise any of them, whether as a result of new information, future events or otherwise. Before I turn the call over to Bill, I’d like to note that this quarter we are starting a new practice at InterDigital like any company, we have a number of moving parts, so they make it a little easier for investors we'd release a tracking schedule of our major financial metrics. The schedule is available under the events tab of the investors section of the website. Near the link where you will obtain login information for the conference call. It’s also available on the investors section if you click on fundamentals and then quarterly results near the top. So please feel free to have a look. And with that let me turn the call over to Bill.
- William J. Merritt:
- Thank you, Patrick, and good morning, everyone. As you can see this morning, we delivered another solid quarter with a close out 2013, with fourth quarter revenue of approximately $100 million bringing our 2013 total to $325.4 million. That coupled with free cash flow of $179.5 million of testimony for the strength and resiliency of the business. Rich will do a detailed breakdown of those results in a few moment, but I like do as offer a recap of 2013 and provide some updates on various aspects of the business. So 2013 was a year of ups and downs. The most significant disappointment related to lack of progress we experienced at the ITC in enforcing our patents. Thankfully as I will explain below, we now appear to be moving forward again. And the other ITC investigation against Nokia, while we started the year on a high note with the case being finally remanded from the Federal Circuit to the ITC the case then sack without apparent action for over a year, thankfully just last week, the commission finally remanded the case to ALJ Essex for further preceding and doing so the ITC confirm that it would follow the Federal Circuit’s claim construction. The commission also filed for InterDigital on several other ways indeed the remanded order we believe, it’s highly favorable to the company. The ALJ will now determine the schedule for the case and we are thrilled to see the case moving toward a positive revolution. We were also disappointed in the ITC decision in the 800 investigation. While we prevailed on almost every issue, three claim construction issues did not go in our favor, including ones where we believed the federal circuit has already ruled and where the ITC was obligated to follow that rule. We are appealing that decision, we believe our appeal was strong. Notwithstanding that loss, our things began to move more in our favor at year end as we agreed to arbitrate the trends having license to our central patents, using an expedited arbitration that will result in an agreement both slightly before the end of 2014. That’s a great result for us since our strong licensing track record and our very reasonable approach to licensing typically bears quite well in arbitration as we saw in 2013 when the company prevailed in all three of its major arbitrations. We also saw our eight investigation move forward and go to trial last week. Importantly while we always believe the case to be strong, since it included the exact same patents as where the subject of the federal circuit appeal. That belief was bolstered last week when the commission issued its remand order in the 613 investigation. That decision affirming that the ITC will follow the federal circuits opinion, and otherwise favorably disposing of the other claim construction issues is usable in the 868 case, further enhancing what we believe is already a very strong position. 2013 also saw us deliver extraordinary results in terms of the management of our license agreement. We prevailed in our license dispute with one of our technology solution customers, driving significant revenue in 2013 and adding nice incremental revenue each quarter going forward. We also prevailed in a pair of disputes involving the Pegatron patent license and the Apple patent license. The result of those wins beings almost an additional $100 million and revenues being recognized during the year, including $21.3 million in Q4 which is recurring. Moreover not only is it a great source of revenue, but it puts us in a strong negotiating position with Apple going forward as we work to renew our license with them on a favorable terms. Another element of licensing felling into place in 2013 with the launch of the Signal Trust. The trust is very important in terms of protecting and maximizing the value of our significant infrastructure portfolio. But we’re trying to believe the trust will deliver nice incremental revenue for the company and we also represent a type of vehicle that we can implement for other licensing initiatives were appropriate. The result of one other important aspect of the trust, part of the transfer of the assets to the trust involve a limited period during which InterDigital retains licensing and other monetization rights to the transferred patents. I can say that we remain within that period, and we are certainly using that limited time period as incentive for parties to complete license discussions. Moving to the innovation side of the business, you all know that in 2012 we reshaped our innovation efforts adding to our internal research activities in more comprehensive external technology sourcing function under the banner Innovation Partners. The purpose of this shift was twofold. Delivered more varied innovations, and do so at a lower cost. In 2013 the new innovation structure delivered precisely what we have hoped. InterDigital labs had another great year keeping InterDigital at the forefront of innovative. Our research in areas like spectrum management, video streaming and increasing focus on 5G areas like millimeter wave backhaul is market leading and continues to position us at the center of global devices, networks and services in the future. That innovation reflected in continue patent success in 2013, lab added 180 U.S. patents to our portfolio bringing our U.S. patent portfolio to approximately 1,700 patents with approximately 1,200 U.S. patent applications pending as of year end. We also filed for a significant number of additional patents in 2013. We are also able to do so while largely meeting the spending guidelines we established for ourselves, as Rich will detail. In addition partners also delivered closing three major agreements. In Q4 we signed VTT a research centre in Finland with a long-track record of innovation for major wireless brands to explore areas of content awareness that agreement joined the deals with the DDD Group through video research and BIO-key for Bio-metric security research. In addition we engaged a number of prolific inventors from outside the company to work with us in key technology areas. These individual have delivered a number of creative innovations for the company. Finally, an update on InterDigital solutions, as you know InterDigital solutions is charged with exploring commercial opportunities related to some of our developed technologies. In 2013 much of that effort was focused around Smart Access Manager which is a client that enables operators to manage device access to Wi-Fi networks with things like data offload and various other services. This past year that solution in collaboration with some of the world’s most significant infrastructure equipment vendors was in operator field trails with top tier operators in the U.S. and Europe where it performed very strongly improve the sales we think to be the best client solutions on the market. This is a market that is in its infancy and in terms of its timing is subject to operator decisions about infrastructure and service roll out, but we’re confident this is a market we’ll be able to penetrate, that’s great news, its own right, but also illustrates the comments I made in the wake of the ITC decision in the 800 case, that’s both about the desirability of having products in the marketplace to position the company differently. Smart Access Manager shows that the effort required to transition from research to product is not significant and can yield benefits. At the close of 2013 we transitioned another family of technology, user aware video screaming into InterDigital solutions. And we’re in the process of exploring commercial possibilities with that very exciting technology. You can see more about all the technologies at InterDigital Vault, which is our online fund transfer repository at valut.interdigital.com. We will also be highlighting the technologies through a live stream at mobile world congress next week in Barcelona. And we ask that you stay tuned for an announcement, and keep an eye on our website regarding the possibility of seeing those displayed live next week. So in closing a challenging 2013 in a number of respects but one where our execution, perseverance, and imagination were rewarded than better expected revenues, and we feel solid prospects for positive 2014. With that, let me turn the call over to Rich.
- Richard J. Brezski:
- Thanks Bill. Well, as Bill noted we delivered another strong quarter. Headlined by $99.7 million revenue, included within that number, is $38.1 million of royalties and tech solutions revenue that relates to prior periods and nearly $62 million of revenue that relates to the current period. I sometimes refer to the second category as our recurring revenue base because it’s a non-included cash royalties or other revenue related to prior periods. So we ended the year with a recurring revenue base that is backed to the levels we experienced throughout 2012, when we average $63 million of recurring revenue per quarter. This is important heading into 2014. And after factoring in the continued decline and royalties from Blackberry among other factors, we have guided to a solid range of recurring revenue for first quarter of 2014, of $54 million to $59 million. As always, our guidance is based on existing agreements, and does not include the potential impact of any new patent license, technology solutions, or patent sales agreements that maybe signed. Moving on to expenses, as Bill mentioned our innovation programs continued to deliver promising results, even as we reduced our investment in internal R&D programs from $68 million in 2012 to $55 million in 2013. This reduction resulted from initiatives we’ve implemented toward the end of 2012, that not only lowered our overall investment in R&D but also provided us with greater flexibility to pursue our broader range of R&D initiative. In addition to our internal R&D investment we’ve incurred $8 million of R&D expense related to work with performed for Convida. Because we consolidate the full results of Convida into our financial statements, despite our sub 50% ownership interest. These expenses are including within the development line on our consolidated statement of income. We then back out the portion attributable to the other owners by way of a $2.5 million after-tax adjustment, which we report as the net loss attributable to non-controlling interest. Our SG&A expense for 2013 also reflects initiatives implemented at the end of 2012. The overall SG&A is down on those $5 million from 2012. On the other hand, we had a pretty significant increase in patent administration and licensing. While the majority of this increase relates to litigation expense it also reflects additional investments such as the establishment of the Signal Trust. Once again we experienced a pretty high-level of litigation spend in Q4 coming in almost $19 million for the quarter. With the most recent ITC case being tried for the last two weeks, we expect our litigation expense to remain high in the first quarter before coming down somewhat over the balance of this year. However, litigation tends to be fluid, and while we can envision scenarios where the expense could come down pretty dramatically, the amount of decrease if any is hard to predict. With that, I’ll turn the call back over to Patrick.
- Patrick Van de Wille:
- Thank you Rich, and with that Justin if we can open the call for questions.
- Operator:
- (Operator Instructions) And we’ll take our first question from Tim Quillin. Please go ahead, your line is open.
- Timothy J. Quillin:
- Hey, good morning. Nice results and some good progress on some of the ITC action, or at least one. On the $21 million, what you talked about as sustainable revenue, from Pegatron, does your first quarter guidance imply that comes down off of that level? Is that just seasonality? How should we think about that over the next couple of quarters?
- William J. Merritt:
- Yes, so the only thing we can say right now with respect of Pegatron is the impact on the fourth quarter but certainly as indicated buyback recurring number and buyback we mean that, that’s the piece that does not relate to prior periods that relates to sales that occurred actually in the third quarter, because they report on the lag and we’ve recognized the revenue when we received the report. The one comment I did make regarding the guidance because Blackberry I think their quarter ended in November and you can look at those shipment and see that they had a pretty significant sequential decrease there and obviously that makes up two of the three quarters in our calendar Q4 and therefore it would be reported to us and record in our Q1 revenue, that that certainly a significant factor in the drop between Q4 recurring and our guidance for Q1.
- Timothy J. Quillin:
- Okay, and just remind me or refresh me on the seasonality. Would your fourth quarter typically be the strongest in terms of revenue on, because there is sell in activity in calendar third quarter, or is fourth quarter typically the strongest quarter for your licensees? So first quarter is higher for you?
- William J. Merritt:
- Yes, so we’ve looked at that a number of times over the years and the conclusion that we’ve actually come through is that there isn't any strong seasonal patent that repeats year-after-year. So I generally don’t look too highly on seasonality, certainly Q4 tends to be an important quarter for folks with holiday seasons and sometimes product launches. But there are lot of different factors in there and to the extent there is seasonality, but only to come into play on a per unit agreements anyway. So overall I don’t know that something you ignore, but I don’t think in our business it’s showing to be quite a driver as it is in others.
- Timothy J. Quillin:
- Okay, and then also remind me or maybe share what products exactly the Pegatron agreement or what Apple products I guess specifically that Pegatron agreement covers right now?
- William J. Merritt:
- So, the Pegatron agreement covers any product that Pegatron produces if you’re asking with respect to Apple and this would be generally true of anybody it might produced for. Their agreement would cover any product that is not covered under, already covered under the ODM license. So, if you look at that the kinds of products that are covered under the Apple license or almost specifically the one that are not including iPads and LTE products. Okay, if they are not covered under Apple that they’re being produced by Pegatron they would be covered under the Pegatron license.
- Timothy J. Quillin:
- When you say LTEproducts, if a phone is shipping with both a 3G and a LTE chip, is that considered, is it just incremental royalties on that LTE phone, or how is that parsed out?
- William J. Merritt:
- If it is LTE capable, under the Apple it is not licensed.
- Timothy J. Quillin:
- Okay, okay and so just with the new phones with Apple, since you shouldn’t we expect an increase in revenue in 1Q versus 4Q?
- William J. Merritt:
- Well without setting up an expectation with regard to Pegatron because again we don’t want to provide, we don’t provide GAAP guidance of that level of granularity. I can comment of Blackberry only to extents that they’ll release results that some would overlap with our quarter. But with respect to Apple and Pegatron as you know that product was their new phones will release at the end of the third quarter I think there was something like a week or 10 days that they were on sale in the third quarter. And then typically with Apple launches there is pretty high volume in the initial launch, but I think all indications and public reports that they had pretty strong shipments in Q4 as well. So I will stick to what's available on the public domain and look forward to reporting our results in the first quarter.
- Timothy J. Quillin:
- That's helpful, and just one last question. Around your patent administration licensing costs. So I understand that intellectual property enforcement is difficult to predict, and could have potential decline once you wrap up some of these ITC actions, hopefully favorably. Beyond that, you have I think $67 million or so in other costs within that line item. And that's higher than it was than the entire line item was a couple of years ago. Does that $67 million, should that grow, or would you expect that to grow or stay stable? Or kind of the non-litigation related costs? Thank you.
- William J. Merritt:
- Yes sure so if you look at patent administration and licensing and you back out the litigation you're right you're and we actually as Patrick alluded to had published some financial metrics, which hopefully make a little more easier for you to do so. You're left with a number in the $68 million range is higher than what we experienced over the past and that’s for a couple of different reasons. There was some additional investment in that area not at least which was the signal trust, there were costs to just first offset up the trust in 2013 which would not recur but then where costs to operate the trust and we only incurred a quarter of those costs roughly the trust was I think launched in the middle of the October. Another important factor there is patent amortization which I believe is up in the order of $6 million or $7 million somewhere in that range. When we at the large bulk of our portfolio is internally generated and we capitalize only the cost to file the patents. So, therefore capitalized costs were internally generated patents are relatively low. By comparison, when we acquire patents that full costs of that acquisition is capitalized and amortized. So in the last 12 or 18 months you’ve seen our patent amortization go up on a pretty steep decline because we have had some activity there and as I just described when you acquire patents that's going to lead to a higher capitalized costs, which in turn meets the higher amortization.
- Timothy J. Quillin:
- Thank you that's very helpful, I will step back.
- Operator:
- (Operator Instructions). We’ll go next to Charlie Anderson. Please go and your line is open.
- Charlie Lowell Anderson:
- Yes good morning, thanks for taking my questions. Bill, a question for you as it relates to smart access manager and then Convida, to what extent were those arguments made in the 800 case of having a product business, if you will, and what do you think has changed since that case to the 868 case, and being able to make similar arguments and may perhaps stronger arguments there?
- William J. Merritt:
- So in 800 investigation we relied on the licensing investment. In part because we have been very successful in that in the 613 case and in the 868 case it gives a little bit of uncertainty around [indiscernible] we added to our arguments a research component. The research component didn’t deal with what Sam and actually dealt with the moving part of the business and so that went I think we did very well. So I think part of the obviously the first reason for investing in things like Sam and SAM is the independent financial value of investments, and we think both of them are very well positioned, Convida is doing very well and we think SAM is very well positioned. Yes second it does give us that added benefit with respect to DI, Although, we think the word DI is settling out, we are actually pretty achieved and then third I think at the top at the end of the 800, in terms of just perception of the company I think you’re dealing with the realities of life, in terms of build rates of patent is working today and certainly having a product is a benefit in terms of perception. So, at a minimum in the litigation, we always talk about everything in addition of that sort of position the company the right way. So I think given the allocation we talked broadening about what we do as a company and that’s always very helpful. Another thing that something that ultimately why people are dependent on in addition precisely what type of company that that provision in the ITC enabling statute was intended to protect.
- Charlie Lowell Anderson:
- Got you, thank you so much for that color. A couple of moving parts on patent buys and then a write off of an investment, I wonder if you can give us more color on the write off? Was that related to patents? Was that an operating company, where you took the value down? A color there would be helpful and then in terms of what you bought in the quarter? What kind of patents are you buying?
- Unidentified Company Representative:
- Yeah so I will speak to the write-off, and I will be careful because I'm trying to remember exactly what we disclosed in the past and simply state that over time we have acquired a position an equity stake in a company as partial consideration for a patent license. And we've at this point taken additional reserves against the acquisition.
- Unidentified Company Representative:
- Okay, and then with respect to patent acquisitions that we are very active last year we continue to be active, I would say we have a couple of different focus areas. Right so one is upper layer technologies. So things related to security positioning, video transport and things like that which augment some of the work that we’re doing inside the company. I think the acquisitions that we have done have been very good, we are very selective because we’ve talked about in the past, we don’t necessarily need to buy patents but certainly if we can get them at the right price, we ended up with high quality, we do that. So we continue to be in the market for those types of opportunities. We also acquire product patents that dealt with sort of product specific features on the handsets. Again related on the work that we have done also sort of broaden our touch points that we have on a device, I think we did a very good job there in terms of in some way it is changing our licensing presentation from what historically and rightly so it has been a great sort of standard essential patent focus presentation and now we have a much broader presentation covering standard essential patents, product implementation, services, so it’s a very nice presentation that we lay out to perspective licensees. So again, I think the acquisitions there are also being done when we see high quality patent. It is coming from companies that had strong research capability that we can acquire at a good price.
- Unidentified Company Representative:
- Great and Charlie while Bill was talking there, he was able to confirm that we do in fact disclose that investment and that was our investment in Pantech.
- Charlie Lowell Anderson:
- Gotcha, perfect that's what I thought. Thank you. And then last question from me, it's been difficult to ignore how many patent disputes that Samsung has been settling out of the gates here in 2014. I wonder if you can compare and contrast where you guys sit with them relative to the some of the settlements we have been seeing? Any color on that would be helpful.
- William J. Merritt:
- Sure. so the settlement with Ericsson usually settled very I guess just a couple of days before the judge is going to issue his decision in that case of, in second they settled with Google and there is another vendor and I think some of the, its interesting I think some of the settlements that are happening in being in now will always happen. They’re just announcing them now and part of that is probably a good thing to demonstrate to that perhaps Washington and perhaps other person. That the industry was able to resolve these issues, and let the industry do that. So I am always encouraged but when people can come to terms and so we believe we are very well positioned as I mentioned in the 868 investigation and hopefully that good positioning will lead to settlement affecting all the respondents in that case but that’s all desire at the end of day and that’s what we will get to.
- Charlie Lowell Anderson:
- Thank you so much.
- William J. Merritt:
- Thanks
- Operator:
- (Operator Instruction) We’ll take a follow up question with Tim Quillin. Please go on, your line is open.
- Timothy J. Quillin:
- Hey, thank you for taking my follow up. And so I guess first question is can you give us any sense what the royalty rate looks like on the Pegatron deal? If you are not specific, maybe some kind of bigger than a bread box description?
- William J. Merritt:
- What we have disclosed, is what we've disclosed, we think it is a solid agreement with these folks so a running royalty agreements, we benefit from that. And beyond that there is not much as you can say in terms of the precise terms of the agreement.
- Timothy J. Quillin:
- Your revenue for fourth quarter came in quite a bit higher than the guidance that you provided. Presumably it was with Pegatron, but where were the surprises for you?
- William J. Merritt:
- Yes there were a couple of items that we are able to clarify, some additional information that came in after we announced our guidance, I think if you look initially our guidance included 27 million a past sales and I think we came in a little bit higher than that. So I don’t think that’s necessarily unusual our guidance is really based on information that we have at a point in time and always subject to additional information coming in or of course signing new deals or getting additional out of results et cetera.
- Timothy J. Quillin:
- It seems like only maybe less than half of the outside relative to your guidance came from the past sales though? It seems like the current sales there, the $21.3 million, was quite a bit above expectations. Was that clarifying what models or what products it exactly pertained to?
- William J. Merritt:
- Yes, it was, and I am sorry, I didn’t mean imply but the past sales made up the increase in past sales made up all that difference but it was certainly part of it. I’ll just say that there was additional clarification on eligible units, and royalty paying units that were reported during the period.
- Timothy J. Quillin:
- Right, and do you have any sense, and I’m sure we could actually or I can actually do work and try to figure this out myself. But what percent of Apples manufacturing Pegatron represents right now?
- William J. Merritt:
- Yes, I don’t think we could really disclose that because as the recipient of all the reports from Pegatron we would obviously have some information that’s not in the public domain, so we wouldn’t be able to comment on that, but there certainly are a lot of reports out there that we can get some good information from.
- Timothy J. Quillin:
- Yes. And I know you have talked about you have Wistron under a license as well. It almost seems like – it looks like a relatively good royalty rate, it seems like maybe the best path is to license the ODMs, and forget about licensing Apple, but are you pursuing a licensing agreement or possibly even arbitration with Foxconn?
- William J. Merritt:
- So we look to license at both levels and the ODM community is – there is certain component to that. I think where they have sort of a mixed model where they produce products on their own and they produce products for other folks. Some of the easier license discussion, because they need to cover their own products. When they have a, when they are basically a captive supplier for someone else, while certainly licensing would be, is appropriate, they tend to more to push it back to the buyer. So it’s a little harder discussion, so it’s kind of what we operate at those levels. So with respect to Apple you certainly have, we can continue the strategy that we have, which is kind of going after both sides, and my preference at the end of the day would be an agreement with Apple. I think it allows them to aggregate their volumes across their suppliers and get the benefit of volume discount that we have offered to folks, and would make us less susceptible to shifts in the Apple supply chain. But however, we ultimately get all of Apples products to use our technology license. We have a couple of different paths to get there, and our goals to get there.
- Timothy J. Quillin:
- Yes, fair. Do you have any sense of the progress or the timing of resolution, the arbitration with Huawei?
- William J. Merritt:
- So in the script to actually go in we think it’s still only in 2013 and 2014 or just thereafter, so we are happy with that opportunity to present our case to arbitrators. We think it’s a, we have a very strong licensing position in part because I think we’ve always been recognized as very fair. So we will see how it all plays out this year, but again I think it’s not only good for Huawei in terms getting that issue resolved, but I think it’s creates a better path for resolving these disputes more broadly so and hopefully it’ll be able to, we’re appropriate to use arbitration with other folks.
- Timothy J. Quillin:
- Okay, and then is there anything you can share, or any early read on the 868 evidentiary hearing? Thank you.
- William J. Merritt:
- The best thing I can say, I don’t think I really get that as it should conclude I think today or tomorrow. And we believe we have a strong case and I think as I mentioned in the script the commission order in the 613 investigation was very helpful not only in the 613 case, but it really positioned in our favor we believe a number of issues in the 868 case and so we are encouraged. By where that case sits today.
- Timothy J. Quillin:
- Thank you very much.
- William J. Merritt:
- Thanks, Tim.
- Operator:
- And we’ll go next to Eugene Fox. Please go ahead. Your line is open.
- Eugene Fox:
- Thanks gentlemen. Bill, you just commented on 613. You said there was some favorable aspects to that ruling. Can you elaborate on what those were and is the commissions order public?
- William J. Merritt:
- So, we will have pretty full disclosure with respect to that order in the K. Which is, is in the very near future so I probably would deferring to them we can look through that. I know that the full commission of order is not public. The shorter order, I think may be on the 613 case, but it’s as typical with the commission short order, it doesn't tend to give you all the details that you need. So again overall, we believe it was a very favorable order for the company both from the 613 case and 868 cases. And we can take a look at the K when it comes out and you can see the various aspects of that decision.
- Eugene Fox:
- Bill just, what is the process that the order spells out in terms of how this gets resolved?
- William J. Merritt:
- So with there’s a remand to judge ethics, who is also the same judge on the 868 case, so it’s good so he is familiar with the issues. It's going to be a mix of some new evidence, but most as good amount of just briefing on a couple of topics that commission wanted to handle. Right now, the judge is actually requesting comments from the parties and how that actually structured that process going forward so that would probably get better defining the next, that probably in the near-term I just tend to move pretty quickly. And I think to an extent that there is fractional information we acquired there will be a opportunity to reuse some of the materials that we gathered in the 800 case, in the 868 case so that will shortly the timeframe. So, we will know more in the next month, I would say. But again it’s pretty well positioned within that case for hopefully a positive result.
- Eugene Fox:
- Okay. Just a couple of questions I noticed you bought some stock apparently very much at the end of the quarter. Is that in reaction to the share price coming down? I know you have been hesitant in light of the regulatory environment to repurchase stock. So any commentary you have on that would be useful.
- William J. Merritt:
- So, as you can see in our filing or you can see in the press release that we gave that repurchase shares in the fourth quarter I think we previously disclosed kind of our rate of activity through the beginning of December and that didn’t pickup at least for a time when the price dropped after the ITC ruling.
- Eugene Fox:
- Got it. Last question, I guess there’s been press over the last couple of days or at least today, as to the Chinese anti-monopoly investigation. Any comments on that relative to where you are and where you think that goes?
- William J. Merritt:
- We issued a release about a week ago, and we had net with the NDRC and we are I mean productive dialog with them right now, and I think we’ve always believed that one stage it’s a fully listed our program and things that we can do or even some additional commitments we could make, because we are consistent with what we do anyway that perhaps we get this matter resolved favorably. So we are working with the NDRC and we’ll see where it takes us, but right now we are encouraged by the dialog.
- Eugene Fox:
- Thanks gentlemen. In terms of the new products, Bill, that you talked about, how should we think of them as being meaningful economic contributors going forward?
- William J. Merritt:
- So, if we started with Sam, as we noted in the script the big issue with Sam is going to be because it essentially in most of these applications requires a sort of operator deployment it’s going to depend on how quickly and to what extent the operators deploy the solution. I would say that the operator interest has certainly increased substantially over the last year. Part of that was also the finalization of the standards around this technology, and also increasing use of the networks for things like video and everything. So we think there is a pretty strong desire to implement it, the field trials have gone well there is a, they do have a good multi-vendor environment on the infrastructure side, excuse me and I think we are positioned well with the infrastructure manufacturers with what we believe is the leading solution. So if there is good rollout, we can have a nice incremental revenue gain there. So it’s going to be guided by the operator, so we’ll probably no more I mean that’s probably with the next quarter we can probably get into a little more I think we’ll have a little more bit more detail, certainly it will be a big part of our demonstration in Barcelona in terms of that solutions.
- Eugene Fox:
- Thank you, well appreciated.
- Operator:
- (Operator Instructions) We’ll go next to Bill Nascovitz. Please go ahead. Your line is open.
- Bill Nascovitz:
- Good morning.
- William J. Merritt:
- Hi, Bill, how are you?
- Bill Nascovitz:
- Oh pretty good. Say it’s nice to the increased buybacks just refresh my memory how much is less than in terms of that authorization?
- William J. Merritt:
- I want to say that, came to the year it was about $120 million on the authorization and we in the quarter did close to $30 million so it’s about $90 million.
- Bill Nascovitz:
- And then Bill in the past maybe I’ve mistaken here, you’ve alluded to perhaps being active on the acquisition front, in terms of new products could you comment further on that?
- William J. Merritt:
- Sure, so our acquisition or investment activity I was pay into we can saw that I tell you the first two or probably more important to us right. So the first is patent acquisition we described that before in terms of broadening our portfolio that often and also giving us greater intellectual property in areas where we doing research. So for doing research and we are in security area or other areas we buy assets in that space to supplement what we are doing inside. So I think that’s a big part, the good part of the, important part of the strategy I think it’s very effective in terms of not only broadening our licensing presentation today, but also giving us a very good opportunity to broaden our licensing programs going forward. Second is investments in companies, so not buying companies, but investing into them. So BIO-key is an example of that, where we invested in them working together on a joint – on R&D and then at Barcelona, we will be demonstrating their technology that we have developed along with them. I think that’s a, it allows, I think it allows us and the other part we kind of leveraged each other skill, so there in the BIO-key example they are very strong on security. We are very strong on security and wireless and so the two of us going together, and I think can do some wonderful things together. The third area is – would be opportunities to acquire what maybe more full fledged product option. We look there, I think the first two are doing a good job and we’re doing a good job internally as we mentioned in this script of transforming our, what our labs projects, since the solutions that are going to be still commercial in the market, and we can do that at a very I think reasonable cost. So the third bucket I think is something we do look for, we do evaluate some opportunities, but not, I think it’s important as the first two.
- Bill Nascovitz:
- Okay. Well, that's good to hear because of our past history in that endeavor. I think could you also – I'm sorry, I'm confused in terms of the Apple. We have a fixed price agreement with them, don't we? And when does that expire?
- William J. Merritt:
- It expires in June of 2014 this year.
- Bill Nascovitz:
- Okay. And that covers,what products does that cover? I'm sorry to perhaps be repetitive here.
- William J. Merritt:
- That’s fine. So there was actually an arbitration this year with respect to the Apple agreement. And we've disclosed, we have prevailed in that arbitration and so that at the licenses now limited in terms of what products it applies to. So that makes Apple does not apply to help e-capable products does not apply to iPads, it does not apply to CDMA2000 related products. So if you look at Apple’s product next to today that doesn’t leave the lot of products actually covered into the license.
- Bill Nascovitz:
- Okay, well, thank you very much and here is to a couple of wins in 2014
- William J. Merritt:
- Great, thanks Bill.
- Operator:
- And at this time there appears to be no further questions.
- Patrick Van de Wille:
- Okay, thank you very much Justin and thanks everybody for joining us on the call today. We look forward to updating you next quarter. Thank you.
- Operator:
- And this does conclude today’s call. You may now disconnect and have a wonderful day.
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