Wireless-technology purveyor and Motley Fool Stock Advisor recommendation InterDigital Communications (NASDAQ:IDCC) will mobilize to bring its first-quarter earnings to Wall Street tomorrow. Here's what's expected of the company as we tap into the feed.

What analysts say:

  • Buy, sell, or waffle? Of the six analysts tracking InterDigital, four of them rate the stock a buy, while one says hold the phone, and one analyst currently recommends selling. In our Motley Fool CAPS investor database, more than 560 of our 50,000 total users have rated the stock, and overall, it gets a big thumbs up, with a five-star rating, the highest possible.

  • Revenues. Since the company guided for revenue between $67 million and $68 million, the analysts took the hint and on average look for InterDigital to report $67.4 million in revenue this quarter, up 31% from last year.

  • Earnings. The average analyst is expecting $0.32 per share in earnings, 39% higher than the $0.23 reported a year ago.

What management says:
While InterDigital continues to generate cash from licensing its patents to wireless industry giants such as Ericsson (NYSE:ERIC), Nokia (NYSE:NOK) and Sony (NYSE:SNE), it is also dipping its toes into the semiconductor business. The company is developing its own chip for wireless broadband cards that would go in laptops and portable devices. "We believe that our terminal unit ASIC offering will be highly competitive in the data card market," CEO William J. Merritt says, adding that "these investments support our growth strategy as we work to deliver valuable technology to the market."

What management does:
You've got to love a company that can churn out margins like this. Licensing companies such as InterDigital and Qualcomm (NASDAQ:QCOM) often enjoy close to 90% gross margins on their licensing business. The downside, however, is the inherent unpredictability of a business that's highly subject to disputes and lawsuits. While a solid portion of InterDigital's licensing revenue -- projected to be about 85% of the upcoming quarter's total revenue -- comes from recurring royalties that are less at risk of notable change, significant swings in overall revenue and profit can still occur depending on the outcome of lawsuits and arbitration hearings.

Margins

9/05

12/05

3/06

6/06

9/06

12/06

Gross

70.2%

69.7%

73.1%

88.4%

89.2% 

89.4%

Operating

12.1%

12.1%

21.9%

66.9%

68.7%

70.0%

Net

6.1%

33.5%

38.2%

53.7%

54.8%

46.9%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
A good amount of future revenue growth is riding on InterDigital's development efforts on an application-specific integration circuit (ASIC) for the data-card market. The wireless-semiconductors business is a tough one, dominated by larger, entrenched rivals such as Broadcom (NASDAQ:BRCM) and Texas Instruments (NYSE:TXN) that have massive cash pools to fund research and development. InterDigital certainly has the cash to fund the development, but it will take some time to know whether it can successfully crack this nut.

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For the record, Fool contributor Dave Mock has never publicly confessed to double dipping. He owns shares of Qualcomm. Dave is the author of The Qualcomm Equation. The Fool's disclosure policy always washes before dinner.