Why Microsoft Would Be Smart To Buy InterDigital

Microsoft Corp. (MSFT) might just be the most boring stock of all-time. Unless you are a billionaire who owns the stock for the measly 2.9% dividend they give and the low risk aspect of it, or you are the most conservative investor who has ever walked the planet, this stock has no pulse. Microsoft, for at least the past 10 years, has seemed content with what it is as a company. It figures everybody uses its Windows Office software and that is never going to change. However, if technology has taught us anything, it's that there will always be something that comes out better and cheaper at some point. Research In Motion (RIMM) could have used that advice a few years ago when it sat on its laurels and took for granted its consumer loyalty. Microsoft has at least started to show that it has some other ideas in mind by getting into the smartphone market and releasing the Windows Phone 7, which has had a somewhat lukewarm response. It hasn't been a complete disaster, however. This is where InterDigital (IDCC) comes into play. InterDigital, Inc. engages in the design and development of digital wireless technology solutions. The company offers technology solutions for use in digital cellular and wireless products and networks, including 2G, 3G, 4G, and IEEE 802-related products and networks. It holds patents related to the fundamental technologies that enable wireless communications. The company licenses its patents to equipment producers that manufacture, use, and sell digital cellular and IEEE 802-related products; and licenses or sells mobile broadband modem solutions, including modem IP, know-how, and reference platforms to mobile device manufacturers, semiconductor companies, and other equipment producers that manufacture, use, and sell digital cellular products. Currently IDCC is in a closed-bidding auction to sell the company to the highest bidder. This process has been ongoing since July 2011. Rumors have swirled for months as to what companies are bidding, bid amounts, whether or not there is a group bid as a consortium, and just about everything else in between. There have been reports that Apple (AAPL), Qualcomm (QCOM), Samsung (SSNLF.PK), and a host of others have been involved in the bidding. Most recently, it has been "rumored" that Intel (INTC) is now the leader to buy the company. At one time, Google (GOOG) was expected to be involved, but when they bought Motorola Mobility (MMI), most assumed that this took them out of the race. I'm not so sure about that. Google still has very weak patents and not enough of them, especially where 4G technology is concerned. This is what makes me believe Microsoft would be the perfect company to buy InterDigital. First of all, Microsoft has already lost lawsuits and eventually settled with VirnetX (VHC), another company who owns some important patents for instant messaging, voice over Internet protocol, smart phones, eReaders, and video conferencing. So, Microsoft has been on the losing end of patent lawsuit and infringement claims. Make no mistake, the patent wars going on with all of these companies aren't going away. The patents themselves can bring in billions for a company in the coming years. Whoever wins the InterDigital auction will be in a very good position to assert its power with these patents. Since Microsoft has already shown it is willing to enter the smartphone market, it can only be assumed that they will eventually have to enter other technology markets to stay relevant. Qualcomm has built its reputation off its patents. Microsoft can continue to do what it does with its software, but also hold some key patents, along with having another revenue stream. It makes too much sense. Microsoft has over $50 billion in cash on hand. It could easily buy InterDigital for $5 billion without any worries to its balance sheet. In fact, I would think investors would be happy to see Microsoft actually try to grow and venture out as a company as its stock has been trading in the same boring range for ages now. Microsoft buying InterDigital, Inc. would at least bring a some life to it.