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bulldzr,
Stock dividends are not taxable when received, only when stock is sold. Stock dividends will reduce the per share basis of the stock you already own. When you sell stock, you will report additional gains based on the reduced basis.
For example if you bought 1,000 shares of stock at $15 per share, you would have basis of $15,000 or $15 per share. If you then sold 500 shares for $16 per share, you would have a taxable gain of $500.
If you were awarded 100 shares as a stock dividend after buying the initial 1,000 shares, you would have 1,100 shares and would still maintain your original basis of $15,000 that now equates to an adjusted basis of $13.64 per share ($15,000 divided by 1,100 shares). The 100 share dividend would not be taxed until you sold any or all of the 1,100 shares. If you sold 500 shares at $16 per share, you would have a taxable gain of $1,180 (500 shares times $16 selling price minus the adjusted basis of $13.64 per share). Part of the stock dividend would be taxed in that transaction with the remaining amount taxed when all shares are sold.
Thoughts on buy backs and dividends
IDCC should issue a stock dividend valued at the equivalent of $1.00 per share. Then they should do a buy back of the shares issued in the stock dividend. The float is not changed so the stock price should not be affected. The stock dividend is not taxed to the shareholders until they sell and the investment value to the shareholder is increased by about 3.85% due to the stock dividend.
A pure buy back will probably not get reflected in the share price. To date the buy backs have only resulted in a higher EPS number and a lower PE. The stock price is the same. A pure dividend will ptobably be offset by a lower stock price to factor the value of the dividend.
Any other thoughts out there?
Jeffree,
So far all the share buybacks have done is taken us from a PE of 16 to a PE of 7.6. They just don't get reflected in the stock price. I would much rather have a dividend. At least I can put that into my pocket and we get the same dollar per dollar reward as management.
Suppose they issued a $1.00 special dividend and you used that money to buy additional stock. At least that may get reflected in the stock price due to the increased demand for stock.
Even better, buy back $40 million worth of stock and then issue us a stock dividend in the same amount. That way it is tax deferred to the shareholders.
Paheka,
I don't think Nokia will settle until there is a ban issued against them and even then, they may choose not to settle because they have minimal market share in the U.S. However, with a win against Nokia, IDCC should gain additional leverage against the other OEMs, including SE and Motorola. They have a lot more to lose in the U.S. than Nokia.
Like Data says, I would still like to see some agreements reached with the smaller players to show progress continues to be made in our licensing efforts. If the smaller players are holding out because of Nokia, I would hit them with penalties for holding out based on a losing cause.
Data,
It's fairly obvious that SE and Motorola have some kind of framework that is contingent on a deal with Nokia. That being said, if IDCC offers special discounts to Nokia, it will probably also apply to SE and Motorola. I believe that is why they are holding out for Nokia. That may also be why some of the others are holding out as well, to see what kind of a deal that Nokia gets. I think Nokia is pretty important in the grand scheme of things so I am in the camp to let the dice roll a little longer until we see what happens with the Federal appeal.
dclarke,
The only inflation we have today is in taxes. You gotta love this government.
Data, what other possible reason could be behind our irrational value. It is certainly not based on projected 2010 EPS of over $3.00. That would give us a P/E of around 9 and that makes no sense at all with the strength of our balance sheet.
The stock is only trading at $28 per share cause analysts like Davenport are showing projected 2011 EPS at $1.70. Apparently, they are not willing to bet on IDCC resigning some existing licensees. IDCC has never been very successful in "wowing" Wall Street and it appears that we are in a stalemate until Nokia is resolved.
Hey dmiller,
I ran across one of your posts on DNDN last month and decided to take a dip. Paid off nicely over the last week. What else are you hiding from us?
Mickey,
If GOIG is looking to move to a different market (leave the Pinks), chances are more than likely that there will be a reverse split to make the stock value look more favorable. The stock could drop in value again after that happens. Long term, this could be a good play but I'm not sure in the short term.
HaHa,
That will be a great opportunity to steal the attention of potential software security customers. Wave needs to demonstrate a time, efficiency and price comparison putting its product up against Credent's. If so, things ought to get pretty quiet in the booth next door to Wave.
Amsterdam,
This is a remarkable endorsement for Wave Systems. Thanks for bringing this to our attention.
Gentlemen,
It appeared the response to the original post was made in jest. Time to move on.
Dory,
I wonder if these sales reps get commissions based on the products they sell. Can you find out what the difference in cost is between software encryption and the hardware version? Is that a significant factor in why the Dell reps believe they have to push the software version or are they just uneducated about Seagate's encrypted hard drives.
I would sure like to know why they didn't present Seagate's encrypted hard drives as an option up front.
P&F,
It looks like a different customer. These aren't anything close to the volumes that were discussed in the automotive contract announced early this year. I hope we see many more of these new business cases. It sure sounds like they have finally made this system easy to install and use.
What happened in after hours trading (referencing Yahoo)? There doesn't appear to be anything negative out there to cause a drop like this.
Mickey, you forget that Levi and Luckern interpreted the claims of IDCC's chosen patents in a way that the patents didn't apply to handsets and that was what IDCC's case was built around. IDCC didn't file a claim against Nokia for base stations so the patents were determined not to infringe because they didn't apply to handsets. If other patents had been included in the case, those very narrow interpretations wouldn't have applied.
It's simply a game of cat and mouse. Nokia can't hide forever but they certainly know how to stall. I'm just impressed that IDCC is not caving into Nokia's attempts to get very favorable treatment in a settlement. I want to see IDCC take Nokia to the mat and pin their ass to the ground.
Then bring on China.
Fish,
The worst part was that Roath took the proceeds and plowed it into Standard Parking stock so it wasn't like he needed the money for anything personal. That just showed me his real focus is on Standard Parking and not IDCC.
When a Director of his stature and tenure sells a boat load of stock, it sends a lousy message to Wall Street and IDCC stock suffered once again.
I don't think I'll be voting to reappoint Roath to the Board again.
Jimlur,
It is strange to see someone exercise May options today unless someone believes IDCC will be paying a dividend in the near future. But the premiums built into the options minimize the benefit of the dividend. I can't think of any other reason to convert options at this point in time unless a short had his/her borrowed stock called. Maybe the SEC is doing a probe of some of the hedge funds and brokers with FTD's on IDCC. Wouldn't that be a pleasant surprise.
Covering shorts through the exercise of options is a good exit strategy that will not significantly impact the share price. However, if a large number of these options are called, people may require a larger premium to sell them again. Doesn't it seem like someone wants IDCC stock badly enough that they are scrounging for shares any way they can find them?
Loop, if that is the case, then I am encouraged. I don't think Levi is all that bright or credible and unfortunately, Luckern supported him to the end. I deal with a lot of regulatory commissions around the country and have seen Commissioners support their staff even when the arguments and findings are absolutely absurd. The staff are like family to the Commissioners and they are supported and protected.
I still believe Luckern was outside his comfort zone on this case and was looking for a settlement ala Samsung. When a settlement didn't come forward, he sided with Levi fully expecting this case to go to appeal.
I certainly hope that the appeal brings about a revision of Luckern's claim construction such that Nokia must be found to infringe. I don't think Luckern can then backtrack on his prior findings of validity and a settlement should finally take place.
Why would a MM buy calls to cover a short? If the MM can manipulate the price of the stock at will as you suggest, there would be no need to protect with options and certainly not June options with those premiums.
They would also be setting themselves up for potential lawsuits for blatant manipulation.
Andrew,
There are a lot of people who routinely sell covered calls to make profits when the stock is going sideways. I would tend to think that Heartland makes a regular practice of this on a portion of its shares. It is guaranteed money and provides a great return on your investment.
I'm more interested in the people that are buying large quantities of options and for what possible reason. The option activity today is way outside the norm for IDCC. Something is definitely up and I'm trying to guess the possibilities. If shorts were buying options to cover short positions, they would not be buying June calls because the premiums are too high. They would be buying April calls for the purpose of exercising them to cover their shorts.
The June option activity that occurred today suggests to me something other than short covering. It seems as though somebody knows of a future event to take place but do not know if it will transpire before the end of next week so they bought June calls for protection. I think we should be hearing something from the rumor mills shortly.
Orient,
I don't think shorts would be buying June call options at this time with those premiums. The June options activity today leads me to believe that something is in the works that is bound to move the stock price in the near future. That is a lot of option activity for one day. Somebody must be in the know about a future event to take place and is using options to maximize share purchases.
I would be more inclined to think we have a potential suitor rather than a settlement with Nokia.
Orient,
The recent options volume signals one of two things. Either someone is in the know about an event to take place next week or it is someone trying to close a large short position using options. That is the only way a short can clear a large short position without affecting the stock price.
Orient,
I think 6,000 contracts represents only 600,000 shares but its still a lot of option activity and signals something is going on.
gattica, we might just learn that IDCC took a financial stake in this new licensee. That could be a positive.
Dissident shareholders can sue and are entitled to fair value of the stock as determined by the court. I would like to see fair value determined using QCOM's multiples. I would be very happy with that.
Technically, cash should be reduced by deferred revenue otherwise you will count the value twice, once in cash and then again when the revenues are recognized on the income statement.
I believe deferred revenues should be included with equity when calculating book value per share though. Deferred revenues reglect future equity before tax.
Net billings and revenues are technical terms used in matching revenues and expenses for financial statement purposes. Net billings reflects actual contracted business by Wave Systems however there are ongoing expenses tied to those billings. Therefore, for accounting purposes, the revenues are deferred and are spread out over the same time frame that the company incurs expenses to offset those revenues. It is not any kind of a negative, those revenues will show up in later quarters and will just keep multiplying, hopefully faster than the associated expenses.
I am just happy that Wave is becoming cash flow positive so that they will no longer have to do any more stock placements. Positive cash flows will also reflect in the stock price going forward. I just wish the SED revenues would improve based on my expectations. A sizeable government contract wouldn't hurt either. If we got a $10 million government contract, the stock would be $10 in no time.
Bull, if we sign SE, it may become another trigger for Nokia just like in the 2G arena. I'll take it.
Good post and pretty much on target. FWIW, I am a CPA and I find the most common reason for selling stock this time of year is to fund tax payments, both final payments for the prior year and the first quarter estimate. Both are due by April 15.
gatticaa,
I don't know why anyone would buy a call in this manipulated market. If there were no market for calls, there would be no call sellers and we wouldn't have this shake down every month ahead of options expiration. With little to no volume, the MM's can take this price wherever they want it to make the most money on options expiration and to trigger stop losses.
Does anyone ever make money buying calls? I quit buying options about five years ago after five years of consistent losses.
I would gladly pay a monthly fee for security for financial transactions and for remote key management to secure my hard drive and software applications.
That would be better than buying anti-virus software in my mind often times from the same people that create the viruses. (LOL)
I'm going to throw this out there in hopes of getting a response that I can understand. I understand Wave's role with enterprises (Embassy and ERAS) but what about the computers that are not tied to an enterprise network. If I want to use the TPM to secure my home computer, who can manage those keys in case my computer gets stolen or corrupted in some way? I have some sensitive data on my home computer that I would like to keep protected.
I would also like to have my home computer tied to an Open ID platform somewhere for secure third party authentication so I can get rid of all these stupid passwords for banks and retail vendor sites. Will the Open ID platform that I choose for secure sign on be able to manage my keys on the TPM?
I have asked Wave on several occasions if this is a consumer service opportunity but have never gotten an answer. Is my thinking off base here?
My guess is that they have agreed on a FRAND rate but are now trying to determine what handsets (or other equipment) the rates will apply to and wat period is to be covered. I'll bet they are arguing over past royalties in most cases.`
So when will Yahoo change our EPS and P/E ratio on IDCC's financial chart? i haven't looked to see what IHUB is posting yet.
If I read this correctly, Dell customers may select Credant's software for factory installation on select Dell models. Doesn't that infer a special order by Dell customers? Is Wave still the default solution for Dell computers?
It sounds like Credant's software is designed to do exactly what Wave's software does, centrally managed end point data protection.
NJ,
I hope you are right. With $346 million in revenues, EPS would come in between $2.99 and $3.16 per share in 2010. That would command a stock price between $45 and $60 without giving any value to cash on hand.
I'm hoping that our Q4 and YE 2009 earnings will finally ring the bells of some computer trading programs. Who knows, even the shorts may start to wake up when their programs are telling them to run for the hills.
Here are my estimates for 2010:
Revenues $ 321,000
Operating Exp
SG&A Exp $ 23,600
Patent Admin Exp $ 60,350
Development Exp $ 55,650
Total Oper Exp $ 139,600
Operating Inc $ 181,400
Int/Div Income $ 4,000
Inc Before Inc Tax $ 185,400
Income Tax Exp $ 69,500 (37.50% effective tax rate)
Net Income $ 115,900
Diluted Shares 44,000
Earnings/Share $ 2.63
Note: Operating expenses include about $60 million of patent administration expenses based on 2009 costs. I believe $8 - $12 million can be shaved from this cost as the litigation winds down. That would leave us projected earnings of between $2.75 and $2.80 per share for 2010. Also, estimated 2010 revenues only reflect a 5% increase over annualized fourth quarter 2009 revenues. This target should be easy to attain and even surpass. IDCC's estimate of Q1 2010 revenue is $78-$79 million which makes this estimate even more reasonable.
Interestingly, based on year end fully diluted shares, 2009 earnings per share are about $2.00 and pro forma earnings per share are about $2.23.
The reported numbers don't give us the benefit from the repurchased shares in 2009.