InterDigital Opens San Diego Outpost in Quest to Ease “Bandwidth Crunch”
InterDigital (NASDAQ: IDCC), a company that invents new wireless technologies and counts Samsung, Research in Motion, and HTC among its biggest customers, has opened a satellite R&D lab in San Diego. The new facility is initially focused on developing technologies to improve the capacity of wireless networks, according to Bill Merritt, the company’s CEO.
Merritt, who plans to be on hand for InterDigital’s open house in San Diego Thursday evening, describes the move as a kind of homecoming for the wireless innovator based in King of Prussia, PA. InterDigital was known as a “TDMA Company” during the 1990s and a counterweight to Qualcomm’s rival CDMA-based wireless technology standard. Merritt says InterDigital’s first wireless R&D program was based in San Diego in 1985, and the inventions created as part of that project were used in GSMs around the world. (For the wireless-jargon-impaired, TDMA stands for Time Division Multiple Access; CDMA is for Code Division Multiple Access; and GSM is for Global System for Mobile Communications.)
Through its 1992 acquisition of SCS Mobilecom/Telecom, which specialized in Spread Spectrum CDMA technology, InterDigital says it became one of the few wireless technology developers with expertise in both TDMA and CDMA technologies.
Like Qualcomm, InterDigital generates much of its revenue from licensing its technologies throughout the wireless industry. The two companies followed sharply different trajectories, however. Today Qualcomm ranks as the largest wireless chipmaker in the world, with net income of $3.25 billion on revenue of nearly $11 billion in fiscal 2010. In comparison, InterDigital posted net income of $153.6 million on 2010 revenue of $394.5 million.
Nevertheless, InterDigital says it plays a fundamental role in developing core technologies for mobile devices, networks, and services. Merritt, who has overseen the growth of InterDigital’s patent licensing business, says the company’s current strategic focus falls into what he calls three general categories of “bandwidth crunch.” He describes those categories as “building wireless pipes” through spectrum optimization, “connecting more pipes” through inter-network connectivity and mobility, and using developing “better pipes” through improved compression algorithms and what the company calls intelligent data delivery.
“We bring technologies into the worldwide standards bodies that create the standards for the next generation wireless.” Merritt says. “It’s basically a giant joint R&D process among many, many companies. And they build and design the specifications for these new systems, which are used to make sure that a Nokia handset can talk to an Ericsson base station.”
As for the new San Diego facility, Merritt says, “We’re following a model we used when we opened an office in Montreal about 10 years ago. So we start the office relatively small, with a little more than a dozen employees, maybe a dozen, and we try to focus them in one or two areas.”
At least initially, Merritt says InterDigital’s San Diego lab “is very focused on the compression technologies that we’re developing as part of a suite of technologies that will address the ever-growing bandwidth crunch that operators have.”
At InterDigital’s Montreal office, Merritt says the company was able to expand over time, largely by hiring key employees from Ericsson and Nortel. “We are much more focused on getting the right person who can really drive some of this critical research that we’re doing, than just hiring a big army of folks, just to implement a product design. That’s not what we do,” Merritt says.
Meanwhile, InterDigital’s CEO says the Montreal facility became more integrated through the years with the company’s broader R&D functions. “So while the offices may have their own personalities, we tend to spread the projects across the different facilities,” he says.
Merritt says InterDigital, which also operates a development lab in New York, decided to establish a facility in San Diego because the area has become an important geographic area for the wireless industry.
“You have in that area incredibly good talent covering numerous aspects of both the current technologies deployed in cellular devices as well as the future technologies that are being deployed. And if you know a little bit about InterDigital, we’re very much focused on that next generation of technology that’s going to drive not 3G—we’ve already done that—we’re focused on what’s going to drive 4G, 4-1/2G, 5G phones.”
The company also wants to establish inroads with research universities in Southern California, including U.C. San Diego to establish what InterDigital calls “lablets where additional R&D gets done.”
How fast InterDigital’s San Diego facility grows “will depend on the success of the current project they have,” Merritt added. “If it’s successful, you’ll probably see us ramp more quickly out there. If it’s a slower progression on the compression project, we probably will ramp a little slower.” That means InterDigital’s San Diego workforce could range from the mid-20s to low 30s after a couple of years.
InterDigital also could have additional moves in mind. At the end of March, the company arranged a private financing that enabled InterDigital to raise close to $184 million for general corporate purposes. In a statement at the time, InterDigital said it also might use the capital to acquire intellectual property-related assets, businesses, or a stake in such businesses.
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