SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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Form 8-K
Current Report
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 7, 1997
INTERDIGITAL COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in charter)
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PENNSYLVANIA 1-11152 23-1882087
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(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) file number) Identification Number)
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781 Third Avenue, King of Prussia, Pennsylvania 19406-1409
(Address of principal executive offices)
(610) 878-7800
(Registrant's telephone number, including area code)
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Item 5. Other Events.
The following material is being disseminated to registered holders of
the Company's Common Stock, par value $.01, among others, contemporaneously
herewith.
To Our Shareholders:
As we enter our second fiscal quarter, we want to continue our series
of letters to update you on progress we are making on our business agenda for
the year and the execution of our longer term strategy.
As you know, our strategy is to pursue aggressively the global wireless
market through TDMA and B-CDMA(TM) products and technology we are currently
selling and developing and by strengthening our revenue and earnings stream
through licensing and alliance agreements. In 1997, we are focused on:
*Increasing our order backlog for UltraPhone(R) systems and decreasing
the cost of the product line to improve margins;
*Continuing the development of the B-CDMA technology with our alliance
partners, Siemens and Samsung;
*Establishing new licensing and alliance agreements;
*Maintaining our current financial condition.
Progress on Broadband Code Division Multiple Access(TM) Technology Development
In the first quarter, our most dramatic accomplishments were the major
steps we took in the development of our B-CDMA technology. We successfully
demonstrated the technology with live over-the-air phone calls using the air
interface for the wireless local loop system at a major trade fair in Germany
and, a week later, at another trade fair in South Africa. We completed calls in
the exhibit halls and linked with long line carriers to place calls between
Europe and the U.S. at ISDN rates. As part of that demonstration, we unveiled
the hardware for the B-CDMA technology based TrueLink(TM) wireless local loop
system, including the ASIC, which is the engine for the air interface.
This is a giant step for us and we are very proud of what our B-CDMA
development team has accomplished. We have been working on this remarkable
technology for several years and we have now reached the point where we can
demonstrate to operators and producers around the world that the technology
works successfully. Current and potential customers are very enthusiastic about
the demonstration and the broad capabilities which the B-CDMA technology offers
to them and their retail telephone subscribers. By reaching this important
milestone, we are currently on track to commercialize B-CDMA products in the
first half of 1998. Given that timetable, we anticipate initial revenue for
InterDigital from the sale of B-CDMA based systems
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late that year.
There are two reasons that our progress on B-CDMA technology
development is important to you. First, as an investor, you can have confidence
we are successfully developing a technology which is attractive to potential
licensees and alliance partners and which will give us a powerful competitive
weapon as we compete for a large share of the global wireless local loop market.
The market is huge. Conservative market analysts estimate its size at $100--$200
billion. The potential future revenue stream for us from the sale of B-CDMA
products and ASICs, and royalties from sales made by our alliance partners, is
significant.
Second, as a user of telecommunications services, you can share our
excitement about what the technology will do for our customers. It will enable
them to give their subscribers (small and large businesses and people like you
and me) a remarkable set of capabilities. With B-CDMA technology, users will be
able to carry on a voice conversation (with wireline quality voice), send large
amounts of data at high speeds, fax information quickly, access the internet,
and hold a video conference, all in the same transmission and all in a wireless
format. Our B-CDMA wireless local loop system will interface with standard
wiring, telephones, computers and fax machines which users have in their homes
or offices and, once it is available, can be put in service quickly. This is
truly a breakthrough in telecommunications technology.
With our alliance partners, Siemens and Samsung, we are now actively
marketing the capabilities of B-CDMA technology around the world. We expect it
to be an attractive product for telecommunications companies serving both
developing and developed nations.
Siemens is planning to make B-CDMA wireless local loop products at its
factory in Berlin, Germany and Samsung is planning its production for its Kumi,
Korea, plant. Both companies are preparing their factories for production now so
that they will be ready to meet production needs in 1998. With our partners, we
are preparing for field trials in Europe, Asia, and the United States late this
year and early in 1998. Samsung has indicated it plans to conduct field trials
in China. We just announced our first potential U.S. field trial site in New
England, with Worldwide Wireless, Inc. We're excited about the opportunity to
test and demonstrate the B-CDMA technology in a field setting in the United
States.
We expect to generate revenue streams from B-CDMA technology in several
ways:
*The sale of ASICs to our alliance partners for the wireless local loop
systems they will produce;
*The sale of ASICs, as the product evolves, to other companies who want
to build B-CDMA technology into their computers, personal digital
assistants, and handsets;
*The sale of demonstration units and field trial units to our partners;
*Royalties from our partners as they sell wireless local loop systems
around the world;
*The sale of B-CDMA modems which will be used in those systems; and
*The direct sale of systems to InterDigital customers.
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We have already sold ASICs to Samsung for its pre-production use, and
we are selling demonstration units to both of our partners to support their
sales and marketing initiatives. We expect additional revenues this year as we
deliver more ASICs and field trial units to our partners.
Progress on the UltraPhone product line
There is also important news about our current product line, the
UltraPhone system. During the first quarter, we completed our most recent order
for our customer in the Philippines and shipped a substantial number of systems
to our customer in Indonesia. We anticipate completing that order during the
second quarter. We are now planning to begin shipping our Pakistani order in the
fourth quarter of this year, subject to completion of adequate financing and the
final provision of radio frequencies. We also began a new relationship with a
second customer in Indonesia which we believe has good potential for substantial
future orders. We are involved in new business proposals for wireless local loop
systems in more than 10 countries and we expect new orders for UltraPhone
systems as this year progresses.
We have recently made good progress in cost reduction and margin
improvement. Gross margins are improved and will be positive in the first
quarter. Productivity and the yield in our factory are up significantly thanks
to design changes, process improvements, and quality enhancements we have made.
We have strong engineering, manufacturing and purchasing teams working on
continuous improvements to the UltraPhone systems and we expect to achieve
profitability on the product line for the first time in 1998.
We are working hard to establish new licensing and alliance
relationships with telecommunications companies around the world. We are now in
discussions with a broad range of companies regarding the licensing of our
technology. These discussions take time, but we are enthusiastic about the
interest expressed by a number of prominent companies.
We are concentrating on maintaining a solid financial condition
throughout the year. We began the year with about $55 million in cash. Revenues
this year will be generated principally from the sale and delivery of UltraPhone
systems, and we are working hard to augment them with cash flow from new
licensing and alliance agreements and other sources. That additional revenue is
essential if we are to maintain our cash position during the year. We are
committed to sound asset management with the objective of furthering investment
in new technology development and preparing for future growth. We also benefit
from the continuing involvement and support of our alliance partners, who are
committed to support both B-CDMA technology development and worldwide marketing
of UltraPhone systems.
Thanks for your continuing support.
Sincerely,
Harry Campagna, Chairman Greg Webb, Chief Executive Officer
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This letter contains forward-looking statements reflecting the
Company's current beliefs or expectations as to the Company's objectives,
growth, revenue and earnings potential, operating margins, cash position and
product developments, as well as to its alliance partners' plans and product
developments and industry market share and growth potential. Such statements are
subject to risks and uncertainties. The following factors, as well as other
risks detailed from time to time in the Company's SEC filings including its Form
8-K filed January 22, 1997 and Form 10-K for 1996, could cause the Company's
actual results to differ materially from the results expressed in any
forward-looking statements: failure to enter into additional alliances or
inadequacy or failure of alliance partners to meet company expectations,
inability to decrease product costs, difficulties or delays in the development,
production, commercialization, or sale of the Company's products, price or
product competition, failure to enter into new or enforce existing license
agreements, inability to secure adequate funds for product development and
operations, research and development and litigation costs, and failure of the
wireless marketplace to develop as forecasted due to technical, regulatory and
other factors. The Company undertakes no obligation to update these
forward-looking statements to reflect events occuring after this date.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
INTERDIGITAL COMMUNICATIONS CORPORATION
Date: April 7, 1997 By: /s/ Gregory E. Webb
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Gregory E. Webb
Chief Executive Officer
