How Low Will InterDigital Go?

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Shares of InterDigital (NAS: IDCC) hit a 52-week low recently. Let's look at how it got here and whether darker clouds are ahead.

How it got here
InterDigital has fallen from its 52-week high of $82.50 set last summer.

At the time, shares popped on news that the company was exploring a "strategic review" that could result in a company sale. The very next day, there was another pop on speculation that search giant and mobile kingpin Google was potentially interested in building its patent portfolio by acquiring InterDigital. History unfolded, and Google's patent play turned out to be Motorola Mobility.


Fast-forward to January, and InterDigital says the strategic review came up short, so it was back to its licensing ways, sending speculative investors fleeing for the exits. A month later the company would report earnings, with full-year revenue falling 24% and net income plunging 42%.

Looks like the patent-trolling business ain't what it used to be.

How it stacks up
Let's see how InterDigital stacks up against other players that rely on IP licensing.

IDCC Chart

IDCC data by YCharts.

Let's throw in some fundamental metrics to take a deeper look.

Company

P/E (TTM)

EPS Growth (MRQ)

Net Margin (TTM)

ROE (TTM)

InterDigital16.2(34.6%)29.7%21.7%
Rambus (NAS: RMBS) NM(542.9%)(21.3%)(15.5%)
Qualcomm (NAS: QCOM) 21.812.2%28.1%17.3%
VirnetX (NAS: VHC) NM(255.1%)(86,315.0%)(27.0%)

Source: Reuters. TTM = trailing 12 months. MRQ = most recent quarter. NM = not meaningful.

The only one of those companies not dripping in red ink is Qualcomm, which also has a chip business in addition to its wireless IP licensing -- and that chip business is largely what's driving Qualcomm's growth nowadays.

Rambus has little going for it recently, considering a major legal loss last year and dismal earnings, although it's still looking for an appeal. VirnetX's figures are nothing short of mind-boggling, as its $20,000 in revenue last year doesn't even begin to cover its $17.4 million in operating expenses.

Just because InterDigital looks less bad than Rambus and VirnetX doesn't mean it looks good.

What's next
InterDigital is also scheduled to report first-quarter results tomorrow, with analysts expecting almost $70 million in revenue and earnings per share of $0.31 -- shrinkage on both fronts. I think there's still more downside for InterDigital. Qualcomm is a much better way to play.

Interested in more info on InterDigital? Add it to your watchlist by clicking here.

At the time this article was published Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Qualcomm and Google. Motley Fool newsletter services have recommended buying shares of InterDigital and Google. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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