Richard Lloyd

Few companies in the patent licensing business can match InterDigital’s recent run of success. This continued last week with another sparkling set of quarterly results. Total revenue for the three months ending September 30th stood at $208 million with a massive chunk (66%) accounted for by a recently announced licensing deal with Huawei.

There were plenty of bright spots for CEO William Merritt to discuss during an analyst call last Thursday. For one, the company may be in line for a return from the recently announced Pixel phone from Google, which is being manufactured by InterDigital licensee HTC. Plus, it’s clear that InterDigital is establishing itself in the vanguard of tech companies that are leading the charge to 5G mobile technology. And with the business enjoying a very healthy financial position, Merritt also raised the possibility of making acquisitions.

However, it was comments that Merritt made around the opportunities in the rapidly expanding Internet of Things (IoT) sector that particularly caught the eye. Such is the potential growth in IoT that he revealed that estimated annual revenue opportunities in the next five years for InterDigital will reach the $75 million to $100 million range - with a large chunk of that dropping straight to the bottom line.

The tech company is targeting licensing opportunities in IoT both through its own platforms and through Avanci, the recently launched licensing platform headed up by former Ericsson IP supremo Kasim Alfalahi. InterDigital is one of six (the others are Qualcomm, Ericsson, KPN, Sony and ZTE) that have thrown their support behind the new initiative, which looks to provide licences to member companies’ relevant patents across a range of IoT-related sectors.

Given that InterDigital is a founder member, Merritt was not surprisingly keen to talk up Avanci’s prospects. The first two sectors that Alfalahi and his team are focusing on are smart meters and automotive, areas which Merritt admitted are new to InterDigital and therefore it made sense to approach them via the new platform. “Without Avanci we would have needed time to establish relationships and a market presence before seeing licensing success,” Merritt explained on the call.  

The message that Avanci represents a potential fast track to licensing revenues across a range of sectors could prove particularly effective as it looks to add to its members. In response to an analyst’s question, Merritt said that while Avanci is not making any projections he “wouldn’t be surprised if they can start to deliver something next year off that platform”. Although he didn’t mention Alfalahi by name, he said that he had known the former Ericsson executive for many, many years and stressed that he was “very confident” in the management team.

Perhaps more than anything Merritt’s comments underline the scale of the opportunity in IoT. While InterDigital is a highly successful tech company it is still not of the same scale as a Qualcomm or an Ericsson, so if Merritt is correct about his own company’s prospects we can expect some pretty hefty returns from future licensing deals for them. Given the current state of parts of the licensing market, that would be a particularly welcome boost.