InterDigital, Inc. (IDCC) stands a gleaming target for acquisition with its 8,800 patents.  Its intellectual property war chest includes patents on key 3G and 4G LTE technologies -- critical to modern smartphones.

I. A Big Auction

The company is currently up for auction with a market capitalization of $3.16B USD, as of early Thursday.

The key question is how much the sale will fetch.  InterDigital was counting on recent patent strife in the mobile market to drive up its price to higher than expected -- similar to Nortel Network's 6,000 patent library, which sold for $4.5B USD to a coalition of Apple, Inc. (AAPL), Research in Motion (TSE:RIM), Microsoft Corp. (MSFT), and others.

However, the Nortel sale reached such heights because of Google, Inc.'s (GOOG) continued bidding.  With Google announcing the purchase of Motorola Mobility, Inc. (MMI) this Monday -- holder of 17,000 patents -- it is unclear whether it will feel it necessary to bid for InterDigital.

That could make a huge difference in the auction.  States Deutsche Bank analyst Brian Modoff in a comment to Reuters, "The problem InterDigital has is that Elvis has left the building. He's got his date.  The problem is finding somebody else to whom it's necessary. It could get acquired, but not at where the stock is at (now)."

II. Who WILL Bid?

Apple is still expected to be a key bidder.  Apple seems determined to continue its legal attack [1][2][3][4][5] on Android handset makers.  And while Google may be relatively safe from suits now, its less IP-endowed partners like HTC Corp. (SEO:066570) may still be fair game, should Google fail to act in their protection.  

In this case, though, HTC should be partially safe, as it -- along with Apple, Samsung Electronics (SEO 005930), Research in Motion -- licenses InterDigital's 3G technologies.  However, with the 4G transition looming it is unclear what companies license InterDigital LTE IP.  Thus HTC  -- who has a market cap of $655B USD -- could still make a bid for the 4G portfolio as a tool to potentially ward off Apple.

Nokia Oyj. (HEL:NOK1V) who will soon primarily make Windows Phone 7 handsets, is a non-licensee who is reportedly interested in the portfolio for defense purposes, as well.

For Apple, the portfolio would allow it to attack non-licensee Android (and potentially Windows Phone 7) handset makers.  While about half of handset makers license the portfolio, many still do not.  It could also use the 4G part of the portfolio to sue companies like HTC, who currently only license the 3G patents.

If the portfolio does see sufficient interest from device makers, it may see some bids from chipmakers, as well.  Qualcomm Inc. (QCOM) is among the firms reportedly interested in the portfolio, from a chip making perspective.

One factor devaluing the portfolio is alternatives on the market, such as Eastman Kodak Comp. (EK) which owns 1,100 digital imaging patents valued at around $3B USD by recent estimates.