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A poke in the eye is a lot better than a bayonet in the arse any day I'd say.
LOL. Here's one that just came in from teecee....
if these guys had a golden goose..theyd surely have it for dinner in the first week
The green eye shade sleuths form the dark side were beginning to push my mean buttons
That "% of dilution" was a mindbender of a dead horse, wasn't it? LOL.
3g is going to be around for a long time, and getting those royalty rates right will be a lot more important for InterDigital's interests over the long term than the date they were signed. Sure enjoy your company around here.
Thanks. Likewise. What I don't get is why some people still fixate more on the sizzle and less on the steak now that IDCC has a cash cow which is bound to attract more institutions that -- in a return to basics from the go-go 90s -- now focus more on the steak and focus less on the sizzle.<g>
claims of personal trading profits are a lot like the claims of shares owned IMO
LOL! You have just found the source of most flame wars! Your next mission, should you decide to accept it, is to find the fountain of beauty and the philosopher's stone.
Let's be careful with expectations regarding 3G. I'm cautiously optimistic about 3G and I probably have a better way of monitoring 3G network deployments than 90% of the people here, but I'm concerned that some people here are determined to raise 3G expectations so high that IDCC can only be guaranteed to disappoint in such a way as to obscure the dramatic improvements of IDCC's financial metrics.
The 2G lawsuit was the only real leverage that IDCC and Ericsson had against each other in the settlement talks. I'm convinced that adding 3G to the discussion would have delayed the settlement indefinitely.
As you recall, Ericsson was already in the process of changing management teams as the case neared trial. Given the disastrous results of Harris vs Ericsson, the new Ericsson team probably wanted to put all 2G litigation behind them and put all the 3G licensing issues in front of them since Ericsson is part of the consortium of US, European and Japanese manufacturers who want to use the 1999 3G patent platform to keep the 3G overall IPR rate to around 5%-10%, down considerably from the 15%-25% overall IPR rate of 2G GSM. QCOM, of course, is the notable exception because they used to have an infrastructure biz and a handset biz, and they still ahve a software biz and a chipset biz to use as chips to secure 3G contracts before anybody else.
Nokia is also a prime mover of that patent consortium and you can now understand why they linked their 3G (FDD) royalty rate to Ericsson's rate. Nokia, of course, got a royalty-free license to 3GG (TDD) because it financed IDCC's TDD R&D and it allowed IDCC to own the patents from that engineering contract.
But are the 3G delays really a problem for IDCC? Within reason, the longer the carriers take to deploy WCDMA, the longer the IPR negotiations industry-wide. The longer the IPR negotiations, the stronger IDCC's financial position gets. The stronger IDCC's financial position gets, the greater IDCC's ability to strenghten its patent portfolio. The stronger IDCC's patent portfolio, the greater IDCC's negotiating leverage......
especially if they can get some of the true technical superstars of the wireless industry to join their team through direct recruitment or acquisitions and provide practical solutions for the wireless industry's most persistent technical bottlenecks in chipsets, power and displays.
It happens....too much information going around.....
I'm quite sure he didn't. Anyway, I think Data Rox can settle this one for us because he posted the transcript of the conference call as soon as it was available.
BTW, "weeks not months" was popularized by the Bush administration before the war so this is where I think you picked it up.<G>
C'mon teecee, Howard never said "weeks not months." Have you gone over to the dark side?
Yes, I agree. I just had to wade back into the mud see for myself.
Most of the malcontents still have to make the transition from owning shares in a turnaround company to owning shares in a growth company. Each stage is a different marathon with different metrics yet there are those who are still trying to convince themselves that each stage is one long sprint. I think most of them are going to wear themselves out at the punishing rate they're going. Unnecessarily so. Well, at least we tried.<g>
Stability was the key metric during IDCC's turnaround stage after a wild survival stage. That they accomplished. IDCC is still in the process of putting together the key metrics for its growth stage, but I like what I have seen so far. And so too do more and more institutional investors.
Maybe a very militant form of Yoga or martial art might help some of the people here who can't think straight anymore.<g>
Naw, I just didn't see anything in your screed that was worth the time. BTW, you were responding to my reply to bulldzr narrowly focused on M&A.
Nothing personal.<g>
And amidst the deafening roar, the relentless change of hands continues, from weaker (emotional) individual hands to stronger (empirical) institutional hands...............
Goooooooooooooood luck!
Bulldzr,
IDCC's compensation strategy is inextricably linked to its growth strategy which includes acquisitions. As you know, IDCC is a unique TDMA/CDMA player today only because of its merger with the Schilling companies in the early 90s.
Aside from boosting its own recruitment program, a generous compensation structure, of course, would make it easier for IDCC to convince potential acquisition or merger candidates to combine forces with it since IDCC now has a cash flow machine. In particular, I think that companies with existing revenue flows in new markets would be perfect for IDCC right now while it waits for 3G (3G TDD in particular) to reach the mainstream. BTW, Mschere has been pointing out potential IDCC acquisitions since the settlement.
From the Proxy Statement:
..........Adoption of the Option Plan Amendment will amend the 2000 Plan by increasing the number of shares of Common Stock available for Awards by five million shares. At March 31, 2003, Awards to purchase 9,748,942 outstanding shares of Common Stock were granted and outstanding under the 2000 Plan, leaving a balance of 1,144,912 additional shares of Common Stock which could be subject to Awards granted under the 2000 Plan. The Board of Directors believes that increasing the number of shares available under the 2000 Plan by five million shares (leaving Awards to purchase 6,144,912 shares of Common Stock available for future grants) is advisable because such Awards reinforce the importance of improving enterprise value over the long-term, and encourage and facilitate employee and director stock ownership, thereby promoting interest in the welfare of the Company by allowing employees and directors to share in the success of the Company and encouraging them to remain in the service of the Company. The 2000 Plan is integral to the Company’s compensation strategies and programs. The 2000 Plan will maintain the flexibility that the Company needs to keep pace with its competitors and effectively recruit, motivate, and retain the caliber of employees essential for achievement of the Company’s success.
...........................................................
This is IDCC's first promotion after the 3/14 Ericsson settlement. If I'm not mistaken, Brogan was instrumental in crafting the creative Tantivy deal which gave IDCC access to complementary patents without going through the hassles of acquiring a company with no revenues. I think this is the model they will keep on using for pre-revenue companies because the moribund IPO continues to make it a buyers market for wireless technology.
KING OF PRUSSIA, Pa.--(BUSINESS WIRE)--April 1, 2003--InterDigital Communications Corporation, a leading architect, designer and provider of wireless technology and product platforms, today announced that Charlie Brogan has been named as Senior Director of Corporate Development.
In this newly created position, Mr. Brogan will lead the Company's strategic mergers and acquisitions activities. He will be responsible for coordinating the identification, evaluation and execution of acquisition opportunities that complement or extend InterDigital's technology and product offerings.
"I am pleased to appoint Charlie Brogan to the position of Senior Director of Corporate Development," said Rich Fagan, Chief Financial Officer of InterDigital. "With more than twenty years of senior level mergers and acquisitions experience, Charlie will lead InterDigital's corporate development activities at a time of positive momentum for the Company. By creating this position, the Company is accelerating its growth possibilities, enhancing its ability to penetrate new markets, providing InterDigital with access to a broader range of technologies and products to offer to its customers, and strengthening the Company's ability to increase shareholder value."
Mr. Brogan joined InterDigital in 2000 as Director of Business Analysis. He was appointed to Senior Director of Business Analysis in 2001. In this role he has been responsible for managing numerous aspects of the Company's financial operations and contributing to business development activities.
Prior to joining the Company, he served for seventeen years as Principal and President of Brandywine Capital, Ltd., an investment banking consulting firm based in Wilmington, Delaware. Mr. Brogan's experience also includes tenure as Chief Financial Officer of AmeriGas, an industrial gas/welding supply company, and as a partner in a leverage buyout group.
Mr. Brogan earned a Bachelor of Science degree in Chemical Engineering from Manhattan College and a Master's Degree in Business Administration from the University of Delaware. He is a Certified Public Accountant and member of the American Institute of Certified Public Accountants as well as the State CPA societies of Pennsylvania and Delaware.
Mr. Brogan also serves on the Investment Advisory Board for Ulster Project Delaware
http://biz.yahoo.com/bw/030401/15505_1.html
Notice how this dude appears to be tapped into the venture capital and LBO communities?
This is a waste of time. What did I just say? You're trying to reduce valuation to an exact science!
Dilution that does not bring about an increase in the market cap that is at least the same % as the dilution decreases share price."
Dilution can occur for many reasons. Market cap is affected by many reasons.
If a company dilutes its equity to raise cash to buy assets that result in 30% sales growth then its market cap will rise most likely due to the rise in sales growth, yes?
If a company dilutes its equity to raise cash to buy assets that result in negative 30% sales growth then its market cap will most likely decline due to the decline in sales growth, no?
What is the use of trying to correlate a decrease in market cap with the % of dilution?????
By the way, you have a tendency to ramble on and get lost in abstractions without presenting any useful data. Narrow it down. Think aloud in private as a matter of friggin' courtesy.<g>
Interdigital (IDCC)
"Survival, Turn-around, Growth"
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
1991-2002
....
YEAR O/S Key Events
....
1991 19.8M
1992 24.1M
1993 31.5M IMMS/SCS merger of TDMA/CDMA patent port.
1994 37.5M
....
1995 46.5M Motorola debacle, Survival stage begins
1996 46.5M BCDMA Alliance (Samsung, Alcatel, Siemens)
1997 48.2M
1998 48.8M
....
1999 50.5M Nokia deal, USPTO Patent revalidation
Survival stage ends, Turnaround stage begins
IDCC hits all-time high during last week.
2000 57.3M Nasdaq hits all-time high on 3/10/2000.
CAFC issues Festo ruling
2001 53.4M
2002 56.1M Probable market bottom in Aug/Sep 2002,
US Supreme Court overturns Festo
2003 54.8M* Ericsson Settlement on March 14, 2003
marks the end of IDCC's turn-around
stage and the start of IDCC's growth stage
....
....
*As of 3/31/2003
Dilution that does not bring about an increase in the market cap that is at least the same % as the dilution decreases share price
You're trying to be too exact about an inherently inexact process. For example, you completely left out the issue of financing acquisitions. M&A is inherently more qualitative than quantitative as evidenced by the fact that most mergers that look good on spreadsheets fail.
You're on ignore until you justify your use of the highly misleading 40M and 60M share numbers.
I don't see float as an issue, dilution is.
I think that at this stage of its development, float is more of an issue for IDCC than dilution.
Growth companies typically dilute their stock to finance their growth plans so if a company can deliver reasonable growth then reasonable dilution will normally be discounted by the street. As I've mentioned before, the 2003 Ericsson settlement marked the end of IDCC's turn-around stage and the start of its growth stage so it's fairly early, but I think it has a very credible shot at joining, first, the 10/10 club (10%+ sales growth/10%+ EPS growth) and then the 20/20 club (20%+ sales growth/20% EPS growth) during the next 4 years.
That's why I cited QCOM, ARMHY and RMBS so people here can stop moping about and actually have a useful real-world perspective of how IDCC compares to other companies with licensing models and how these companies, at different stages of development, have diluted their stock over the years to finance their growth as measured by those revenue milestones.
Float becomes a real issue for institutions that want to establish larger positions but do not want to make too many waves scaling in and out of the stock. Sure, IDCC can actually play around with its equity by, say, reducing, the supply and in effect creating a disorderly bidding war for the limited supply, but I think that will actually have the opposite effect of shrinking the universe of potential institutional investors rather than expanding it. Like I said, take a look around at those financial databases to see for yourself.
By the way, taking everything into consideration, including the impact of option expensing on most of Corporate America's financial statements, do you realize how very few small companies actually have a legit chance of joining the 10/10 and 20/20 clubs in the next 4 years?
In those cases IDCC never said it expected to receive those amounts. It was improper to speculate, based on those amounts, about IDCC revenue income.
LOL. But you know how it goes. All it takes is one malcontent with a bad case of proportion to mouth off on this message board then others pick up on it and amplify it and before you know it, we have a sizable "pennies on the dollar" crowd reinforcing each other with increasingly flawed data.
It's part of the perception game that IDCC now has to play now that it has the financial gravitas to increase institutional ownership from less than 30% to more than 50%.
Perhaps the Option Plan should have been proposed as a conditional one, that such and such an Option Plan will only take effect and be duly authorized upon the agreement and payment of Nokia and Samsung in full as now anticipated from the ERICY settlement.
That sounds like an unorthodox option plan that you don't see many companies use. If you look at the 1996 and 1997 10Qs and 10Ks you can track the progress of the shareholder lawsuits that hit IDCC after the 1995 Motorola debacle. One would think that current management has learned useful lessons from that event. That's one form of check and balance. I also assume that management is at least as smart as me so why would any rational management spoil IDCC's hard-earned transition from a turnaround company to a bonafide growth company with a stunt like that?
Blueskywaves, your posts seem to equate float with dilution. Float is the number of shares outstanding, and can be increased by stock splits, share sales by the company,
This is incorrect. Outstanding shares is the number of shares issued. Float is the number of outstanding shares less shares held by insiders and 5%+ owners. In other words, float refers to the actual number of shares available to the public for trading. From Yahoo, IDCC's current float is nearly 50M shares out of diluted outstanding shares of around 55M.
Like I said, look around. A float of 50M shares is too tight for a soon-to-be $200M a year company that is trying to attract
more mid-cap funds to establish larger positions. A split would solve that, but if IDCC is contemplating the acquisition of a company with existing revenues then that would be preferrable.
By the way, funds flow also appear to be favoring mid-cap funds at the expense of big-cap funds.
LOL. The simple reason you are shying away from my direct challenge to support your 40M and 60M share numbers is that you can't support your numbers. Your numbers are misleading. Period! Because your arguments about IDCC stock dilution are based on those misleading numbers then your arguments are also misleading and your credibility is shot. Period!
Why waste people's time with numbers and arguments you can't support? That would be like saying that you never lose at games of chance or the stock market. LOL.
You're welcome. You make a very good point. IDCC's management can do a better job of communicating. For example, I thought they blundered when they disclosed their the amount of their claims against NEC and Samsung. In the process they raised expectations unnecessarily especially among the individual shareholders here most susceptible to the vapors. At times they also came close to negotiating in public, a definite no-no considering how closely linked the Ericsson, Nokia and Samsung deals proved to be. Regarding the proxy, I don't think they could have provided the details you wanted without sacrificing management flexibility. I actually haven't seen a proxy in Corporate America that provide the details that you wanted.
In any case, IDCC's turn-around stage started with the 1999 Nokia deal and ended with the 2003 Ericsson settlement. Now that IDCC is entering the growth stage of its corporate development, we will probably see more improvement. As many have pointed out already, IDCC now has to attract a new group of institutional investors that is much larger than the small cap-oriented institutions that they have attracted so far.
Yes, I know how to get the right numbers to judge the issue of dilution for myself and I already know that you are using misleading numbers.
That's right, MISLEADING! Your 40M and 60M share numbers are misleading! All you have to do is show me how you got those numbers so I can take you apart even more convincingly. That's a direct challenge!
The problem with people like you who like to use emotional arguments without knowing it is that when people use facts to take apart your emotional arguments, you take it personally and react in the weirdest ways.
Grow up! LOL.
LOL. You're still trying to define option expensing in terms of right and wrong. That's your problem not mine.
Corporate America started using options in the early 50s generally with the same accounting treatment that is used today. FASB wanted to change option accounting in the mid-90s as it became more popular because they were concerned about the perverse incentives it was creating, but politicians from both sides forced them to back off. Now FASB is in the process of implementing the rule change in early 2004.
By the way, you still haven't explained how you got your 40M and 60M numbers? Like I said, the math should be easy enough for you.
Well, you are still AVOIDING my questions about your basis for claiming excessiving executive compensation or excessive dilution. In both cases I cited QCOM, ARMHY and RMBS for comparison. I actually have a larger universe of companies with licensing models that I have been following for the last 10 years, but those 3 companies are the most relevant to this discussion.
Don't waste my time with your highly subjective twirls until you answer those questions. I suggest you ask help from Ronny since I'm still waiting for his reply about the flawed data he used for his posts about executive compensation.
2002 Annual report tidbits:
The exercise of an option results in a cash infusion, a tax deduction and dilution.
To illustrate, out of a total outstanding pool of 10,462,000 stock options, 7,702,000 options were exercisable as of 12/31/2002 at a weighted average exercise price of $12.14. That's a potential cash infusion of $93.5M.
IDCC also has $138M in NOL (net operating loss) carryforwards, nearly half of which can be attributed to tax deductions related to previous option exercises. Under the current rules, the exercise of options will also increase IDCC's deferred tax asset, which will come in handy in reducing IDCC's tax burden now that it's starting its very profitable growth stage.
IDCC has 1,878,000 options left available for grant under the current plans. It also has 222,000 warrants convertible to common stock at an average exercise price of $6.22. Lastly, IDCC also has a restricted stock program with 2.58M shares still available from an authorized 3.5M shares.
Restricted stock issued went from 813k shares in 2001 to 915k shares in 2002 or less than 13%. If I am correct that these warrants and restricted stock are generally reserved for management and outside consultants then it is worth noting that the number of restricted stock issued only increased by 13% in 2002. Is that excessive? Royalty income increased by 170% and the stock increased by 50%!!!
Nearly 90% of IDCC's outstanding option pool of 10,472,000 is in the money. The average size of each employee's option package is nearly 35k with a 10-year vesting period.
1,878,000 options available for grant covers around 54 average-sized option packages. Adding 5M more options to the pool would allow IDCC room to budget 115 more average-sized option packages (read: employees) or a total of 169 packages.
IDCC had 300 employees as of 12/31/2003. During the last 7 years its headcount has ranged from 126 to 319 as it scrambled to recover from the 1995 Motorola debacle. Now that it is starting its growth stage, it does not appear to be excessive for IDCC to budget for 169 additional employees in advance using its current 2002 300-employee headcount as a baseline. That's only a 56% increase in headcount for a company that we all hope will grow sales in excess of 10% or 20% per annum for the next 4 years at least.
Using an estimated $150M in 2003 sales as a baseline and assuming sales growth of 10% per year, IDCC would need a higher headcount to support $311M in sales in 4 years, or more than double 2003 sales. Using an estimated $200M in 2003 sales as a baseline and assuming sales growth of 20% per year, IDCC would need a higher headcount to support $415M in sales in 4 years, or again, more than double 2003 sales. The caveat here of course is that royalty-driven sales growth will require different staffing requirements (LESS) than product-driven sales growth (MORE).
Like I said, a small wireless company with healthy sales prospects and a very flexible cost structure like IDCC stands to benefit the most from the accounting rule changes next year since the rule change in early 2004 will most likely lead to a MIGRATION OF SCARCE WIRELESS TECHNICAL TALENT away from large wireless companies with relatively flat sales, inflexible cost structures and increasingly mediocre option programs. Already, you're starting to see more tech companies prepare for the 2004 rule changes by slashing headcount and issuing less options and more salaries to its employees.
What a shame it would be if IDCC can not take full advantage of this migration of scarce technical talent because of the short-sightedness of some sad sacks, er, shareholders.<G>!
LOL. Reasonable people can agree to disagree about the odds of arbitration with Nokia, but you still avoided my main point about dilution and you keep on making emotional arguments.
If you think that IDCC has diluted its stock excessively then what is your basis for comparison? If you don't like to use the $200M revenue level then use TTM revenue of $88M, which is stale data.
You only make yourself look sillier if you keep on avoiding that issue. Let me make it simpler for you.
Most small companies typically have to scramble to finance its business plan. Issuing equity and debt are the primary means of financing available to small companies. That's why it's useful to look at the number of shares a company has to issue to reach its revenue milestones and compare the rate of dilution to its peers. You're raising the issue of dilution without even bothering to understand that fact. That's why your opinions come out as flighty and trivial.
2003 to date Lost the Sharp contract.
This is MISLEADING and typical of the way you discuss facts.
The original 5-year Sharp contract covering PHS/PDC phones was signed in 1998 and expired in March 2003. IDCC and Sharp, however, agreed on a new 5-year contract covering GSM and 3G in September 2001 which expires in 2006.
The new contract covering GSM and 3G is obviously much more important. Note that global handset sales increased 16% in the March quarter driven by 2G/2.5G cameraphones and phones with color screens. Nokia and Sharp are driving that growth. I also don't expect major problems with the renewal of the PHS/PDC contract.
Expectations and reality concerning this company had not exactly aligned well to date
You're correct. Expectations by shareholders like you have consistently been too high as evidenced by your comments about "pennies on the dollar." That's your problem!
"Pennies on the dollar" imply that you understand what that dollar was actually worth to begin with. Sorry, I haven't seen anything to persuade me of that. You're just sponging off the data you find on message boards and not really thinking for yourself with cold hard datapoints.
Waiting before rewarding being the key point
That's the key difference. You don't think management has done a good job of creating shareholder value by your very subjective measures. I think that management has done a good job of creating shareholder value after the 1995 Motorola debacle by most objective measures. Typically, your view of management quality colors all your other views about the company.
The problem is that your subjective measures are not only questionable but also making you short-sighted. Look at your fixation with management compensation and your utter lack of context because you keep on rejecting the easily verifiable data that clearly shows that despite all the shareholder value that management has created after the 1995 Motorola debacle, its compensation policy is STILL not out of line with its peers in the licensing business.
As an exercise, use QCOM compensation as the upper boundary of a wide range that includes RMBS compensation as the lower boundary. IDCC's fixed compensation packages since 1998 have consistently been closer to RMBS than to QCOM. This should come as no surprise because IDCC's board uses executive compensation experts to align its compensation policies and those experts use relevant data from IDCC's licensing peers, not the crappy data you find on internet message boards.
The reason I think that you're being irrational and short-sighted is because I think that the ERICY settlement dramatically improved IDCC's ability to recruit technical talent in the critical areas of WCDMA chipset tech, battery tech and display tech either through direct hires or Tantivy-like deals or acquisitions. The key to making that work is a small company culture with a generous compensation structure. I've already elaborated at length on how the exercise of an option currently results in a cash infusion, a tax benefit and dilution so I'm not going to rehash those benefits.
What is really amusing is that your short-sightedness is making it impossible for you appreciate the fact that the FASB accounting reforms slated for early next year will encourage a migration of key techical talent from large companies like MOT, QCOM, ERICY and NOK which have relatively inflexible cost structures to small companies like IDCC which has a very flexible cost structure and which already has working relationships with those large companies. That short-sightedness has the same force and effect as a mental block or tunnel vision.
But that short-sightedness is okay since you've always held yourself up as a short-term trader. Just don't try to drown in facts that you barely understand.
Where did I attack you?
By suggesting that I work for IDCC.
How I arrived at my conclusion that the compensation for IDCC's management is excessive is inherent in my post to you.
You post was nothing more than a rambling emotional argument with no useful data.
Like I said, if you want to argue about IDCC's excessive compensation then what is your basis for comparison? I already listed QCOM, ARMHY and RMBS for comparison. What about you? Facts and numbers please!
If you want to argue about IDCC's excessive stock dilution then what is the basis for comparison? I already listed QCOM, ARMHY and RMBS for comparison. What about you? Facts and numbers please!
Try to go no more than 3 sentences without presenting one easily verifiable fact if you can, please!
To manage only 300 employees and to be paid the cash compensation plus the excessive options is a truer yardstick in comparing the pay of IDCC management with other companies.
Give me a break! You don't want to compare IDCC's licensing model with other companies that are also in the licensing business because it doesn't support your preconceived notion about IDCC's excessive compensation.
Now you want to use number of employees??? Amazing. LOL.
Very well, let's take a look.
As of 3/20/2003, IDCC had 300 employees as follows:
R&D 216 ( 72%)
Patent
Administration 11 ( 4%)
Others 73 ( 24%)
....
Total 300 (100%)
....
What's the proper measure of productivity for a company dominated by engineers? Patent production, right?
Well, as of its last 10K, IDCC had a total of 240 US patents and 540 foreign patents.
It also had a total of 375 US patent applications and 1,443 foreign patent applications.
In 2002 alone, IDCC was issued 41 US patents and 117 foreign patents. In 2002 alone, it also applied for 780 patents worldwide or 43% of its total patent applications.
More than 95% of all patents expire without generating any income at all so, obviously, the value of a patent portfolio can only be determined by the income it generates, right?
LOL! You come back right, kicking and shouting, to my twin exercises:
1) Name one company that has generated more than $7 per share in cumulative royalty income from its inception to 12/31/2002?
2) Name one company that will generate more than $7 per share in cumulative royalty income during the next 4 years?
Unless you answer those questions honestly then you really don't have a sound basis for your views about executive compensation.
Obviously, management had something to do with that patent production, right? And if you agree that management had something to do with that patent production then management is responsible for the income generated by those patents, right?
The really amusing part of this exercise is that if you compare IDCC's patent productivity and IDCC's executive compensation levels with other companies in the licensing business then there is no way in hell that you can call IDCC's executive compensation program excessive.
Additionally Jim, IDCC doesn't have a very liquid options market so anybody who tries to go for size creates his or her own pricing reality and will probably get nickled, dimed and quartered to death for the privilege. Definitely not worth it.
I say IDCC should try to keep it as simple as possible while it establishes its credentials as a growth company.
No, Jim. Why? It won't be worth it. IDCC management now has to establish its credibility during IDCC's growth stage so why bother?
it's a game of sheer luck
That's why it's the perfect game for the recreational gambler like me who has absolutely no intention of making a living out of it. The game usually exhibits ragged patterns, see-sawing from player to banker irregularly -- this is where most players' discipline break down -- but when the banker or player goes streakish and you catch the streaks early, you are in a zone, man, like few others. You are virtually carressing the shapely curves of an admiring Lady Luck herself!
I made a few grand in less than 15 minutes at a Bellagio Bacarrat table when I was there for The Last Comdex<g> so I am certainly biased.
So why doesn't anybody like Bacarrat? It is a true Game of Kings because it is a true Game of Chance with remarkable simplicity. You can bet on Player or House or Draw. House has a tiny engineered advantage. Draw has a huge natural disadvantage. It can only be as simple or as complicated as you want it to be.
If you can't argue the facts then attack the person, eh? LOL.
No, I don't work for IDCC and yes, I actually look forward to early 2004 when FASB is expected to implement the rule that will expense options so that tech companies can readjust their compensation policies to reflect the reality that many areas of technology still suffer from serious overcapacity.
If you're going to argue about IDCC's excessive compensation or dilution then don't be surprised if people expect you to explain how you arrived at that conclusion. Otherwise, you're just wasting people's time and your credibility will suffer.
Just look at the people screaming about excessive compensation and stock dilution. When confronted with the easily verifiable facts that directly contradict their views, they just keep on screaming and screaming and screaming..... LOL.
Thanks for the usual thoughtful response, Ronny.
What I advocated was a comparison to other small-cap technology companies.
I agree. However, a comparison to other small-cap technology companies is only useful if you also perform a comparison of IDCC versus other small-cap tech companies with reasonably COMPARABLE licensing models. I don't see RMBS and ARMHY in that universe of small-cap tech companies so I think that's misleading. Even adding a dividend-paying big cap like QCOM to that universe would be useful since it is the most successful generator of royalties after IBM.
As many have pointed out repeatedly, the licensing business plan is more difficult to implement than a fabless chip business plan or a software business plan. That's why we have a very small universe of companies with significant royalty income.
For instance, one unique risk of licensing business plans is litigation. Common sense tells you that those litigation risks severaly handicap a company's ability to compete for managerial and technical talent so the proper comparison for executive compensation should be among companies with similar handicaps, companies which have to pay higher levels of compensation because of the higher risks associated with litigation.
I also think you need to bifurcate salaries/bonuses/others (fixed compensation) from options (variable compensation). Why? IDCC has outperformed QCOM, ARMHY and RMBS in the last 2 years and created more shareholder value than 95% of all technology companies in the last 2 years so its options have become more valuable. Yes, I know that FASB allows companies to reprice underwater options under the 6 months plus 1 rule, but that only serves to contrast the fact that IDCC has an executive options program because it has created genuine shareholder value in the last 2 years while its peers in the licensing business have an executive options program despite the fact that they have NOT created shareholder value in the last 2 years.
Using those two metrics, IDCC's salaries/bonuses/others DO NOT appear to be out of line with its peers in the royalty business. I do not think you can adequately judge IDCC's options plan without relating it to its stellar stock performance during the last 2 years and that performance speaks for itself.
Overall, I do not think IDCC has excessively diluted its stock
and wasted money on its compensation programs. Again, compare IDCC's total 60M-70M shares with QCOM (800M+ shares), ARMHY (338M+ shares) and RMBS (98M shares). Go deeper and compare the number of shares outstanding to revenue levels to get a balanced perspective.
But, in 1999, InterDigital dropped all previous plans (for development of wireless devices) and adopted an entirely new business plan - participation in standards bodies for the development of 3G technologies
Great point. The BCDMA deal in 1996/1997 was the first major step in IDCC's attempt to recover from the 1995 Motorola debacle. The 1999 Nokia deal marked the true start of IDCC's financial turnaround. And as you've pointed out, it also marked the shift from IDCC's previous confrontational legal strategy to its current collaborative strategy through the standards board. The 2003 Ericy settlement marked the end of IDCC's financial turnaround and the start of IDCC's growth stage.
IDCC starts off its growth stage with an annual revenue base of $200M-$300M+ highly achievable during the next 2-4 years and an initial war chest of at least $400M to finance the cash burn of its growth plans which now include M&A.
I think that M&A's strategy is still fluid. However, it is worth noting again that one of the first steps they took after the 3/14 ERICY deal was to promote the ex-venture capitalist who joined IDCC in 2000, at the peak of the Venture Capital boom and, interestingly enough, while IDCC's stock was in the process of giving up practically all its late 1999 gains.
From what we can tell of the M&A strategy that they are still putting into place, I think we can expect to see them do more Tantivy-like deals or deals with pre-revenue companies that have intellectual property that can improve the commerical appeal of IDCC's patent portfolio. As mschere pointed out, the IPO market remains moribund so it remains a buyers market for many areas of technology.
More thoughts on M&A later.
Gee, P, you better be careful you don't sound too Clintonesque. Vote with the minority but agree with the majority.
Just kidding.
Sure, but my point is that I backed up my viewpoints with easily verifiable facts. Excessive dilution? Presto! Verifiable facts on demand. Excessive exec compensation? Presto! Verifiable facts on demand. You didn't even bother to reciprocate that essential act of courtesy.
Not all opinions are created equal.<g>
You're just being stubborn - Again! <G>
Sure, but you will agree that the level of discourse on this board will become more useful if more people learn to use easily verifiable facts to support their opinions.
Defintiely no, Jim. Selling puts was a great way for some big caps like Microsoft, Intel and Dell to collect cash premiums in a bull market, but it proved to be a great waste of free cash flow during a bear market.
For example, Dell is still retiring puts it sold at around $44 per share while its stock remains stuck in a multi-year trading range with a hard upper limit around $30. Dell has to keep on forking over the cash difference between $44 and its applicable stock price to retire those puts as they expire.