InterDigital, Inc. (NASDAQ: IDCC) today announced that its Board of Directors has authorized an increase to the company’s existing stock repurchase program, which was announced May 4, 2012, from $100 million to $200 million. The increase to the share buyback program was made in conjunction with the announcement that certain of the company’s subsidiaries had agreed to sell a portion of the company’s patent portfolio to Intel Corporation (“Intel”) (NASDAQ: INTC) for $375 million in cash payable at closing.
This is where the money will be made over the next several years.
“We announced at the start of the year that InterDigital would seek to broaden our strategies to monetize our patent portfolio through sales, licensing partnerships and other means, and the transaction with Intel is a significant milestone in those efforts,” said William J. Merritt, President and Chief Executive Officer of InterDigital. “In addition to patent sales, InterDigital is committed to our previously stated goal of generating $800 million in sustainable annual revenue in the next three to five years. Furthermore, the added financial strength generated as a result of the sale of these patent assets to Intel enables us to pursue our licensing efforts even more aggressively, while also continuing the development of new inventions that will drive the future of wireless.”
Consistent with prior stock repurchase authorizations, InterDigital may purchase stock from time to time through open market purchases, pre-arranged trading plans or privately-negotiated transactions. The amount and timing of the repurchases will be based on a variety of factors, including general business and market conditions, the availability of an open trading window, cash requirements, strategic investment opportunities, the timing of the signing of any new license agreements as well as the timing of any additional sale agreements related to the company's patent assets.
The accounting for the patent sale transaction is still being finalized. However, the company expects that a significant portion of the gross proceeds from the transaction will be recognized as revenue in the period in which the transaction closes, which is anticipated to be the third quarter of 2012. In addition, the company expects to record a related charge of approximately $3 million in second quarter 2012 to increase its accrual for the company’s long-term compensation program cycle ending December 31, 2012.