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InterDigital's Partner EpiSci Secures U.S. Army LTE Deal

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InterDigital, Inc. (IDCC - Free Report) recently announced that its partner EpiSys Science, Inc. (EpiSci) has clinched a contract from the U.S. Army Small Business Innovation Research program. EpiSci was awarded the deal to develop an Emulated Long Term Evolution (LTE) Analysis Environment.

Per the deal, EpiSci will be responsible for designing a high-fidelity LTE/5G protocol modelling module for the Extended Mobile Ad hoc Network Emulator (EMANE) platform. Notably, as an open-source modeling and simulation tool, EMANE offers a low-cost capability to carry out research and experimentation for various wireless network systems. At the initial part of the project, EpiSci will get technical support from InterDigital to develop the baseline LTE/5G Physical and medium access control models in EMANE. Also, InterDigital will provide support to EpiSci on the selection and integration of open-source LTE/5G higher-layer protocol models. Also, both the companies will work on enhancing the LTE emulation system design with the development of working emulation environment system with added capabilities.

Existing Business Scenario

InterDigital’s global footprint, diversified product portfolio and the ability to penetrate in different markets are commendable. Also, the addition of technologies related to sensors, user interface and video to its offerings is likely to drive considerable value, considering the massive size of the market it licenses. This Zacks Rank #3 (Hold) company has outperformed the industry it belongs to in the past six months. The stock has gained 16.5% compared with the industry’s increase of 10.4%.

Moreover, the company remains committed to pursue strategic acquisitions in order to drive its product portfolio and boost organic growth. In July, it completed the buyout of the patent licensing business of Technicolor, a global technology leader in the media and entertainment sector. This deal is expected to provide InterDigital with an enhanced portfolio of video technologies besides opening up new opportunities in the consumer electronics market. In fact, the company expects the Technicolor video coding assets to eventually add about 10% to the revenue base of InterDigital’s core terminal unit licensing business.

However, the company faces significant competitive pressure and needs to constantly work on product quality and customer service. Also, in order to hedge the competitive pressure, InterDigital has to invest significantly in R&D to come up with innovative technology solutions, which in turn might lead to escalated costs.

Key Picks

Some better-ranked stocks from the same space are Ubiquiti Networks, Inc. (UBNT - Free Report) , Clearfield, Inc. (CLFD - Free Report) and QUALCOMM Incorporated (QCOM - Free Report) . While Ubiquiti Networks sports a Zacks Rank #1 (Strong Buy), Clearfield and QUALCOMM carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ubiquiti Networks exceeded estimates thrice in the preceding four quarters with an average positive earnings surprise of 8.96%.

Clearfield surpassed estimates in each of the trailing four quarters with an average positive earnings surprise of 52.78%.

QUALCOMM outpaced estimates in each of the preceding four quarters with an average earnings surprise of 19.75%.

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