is... buying more shares
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GrnAcrs,
You have a good point. Wealthy individuals, like poorer individuals, have the right to be prudent with their investments. Especially in light of the past few years of dismal stock market returns.
I don't know exactly how Bill D. would respond to the captain, but since he is a CFP, I would expect him to note that there are planning strategies other than diversification that prompt insiders to sell.
ISOs trigger AMT -- and after thousands of options holders got burned early this decade (converting the ISOs to stock and holding for one year to get preferential AMT treatment) -- I am sure the conventional wisdom has changed. Non-qualifieds aren't subject to AMT, but other tax and planning issues must be considered.
Each insider, from Harry to Rip, has a different financial situation. I would like to say that if I was ever a top executive at a technology company, I would hold all my shares and give shareholders a sign of my company loyalty and support.
Of course, I couldn't say that -- because I would sell shares from time to time. Especially when the economy is in the crapper, the world is at war, and my stomach couldn't handle the roller coaster ride. In fact, to make Once happy, I would probably time my sales exactly at the top of a short-term price jump.
Cheers.
bulldzr & Menander,
bulldzr: I think he italicized most of his comments while my quoted comments (traditionally in italics or bold) were left in normal text.
Menander: I think our discussion has strayed from the original topic and is not very productive. I apologize for my earlier tone.
Cheers.
postyle
Spree,
every single time we go on a run, the insider selling stops it
This statement epitomizes the corner-bar mentality.
Stocks just go on "runs" -- for no rhyme or reason. Bad men make the stock go down. Evil persons! Short sellers, market makers, insider sellers.
Thanks for the chuckle.
Spree,
coming from you, I take that as a compliment {ggg}
Menander,
It is apparent that you are irrational when speaking of this issue.
The "core issues" you reference are not that of the long-term investor who expects a healthy return on investment based on a fundamental growth in earnings over time.
The evidence points to a corrupt conspiracy of the existence of a perpetual option-granting machine manipulated by only two Board Members.
This is not evidence of a conspiracy. It is a transaction log of executives who have liquiditaed some of their holdings.
As for my "attempt to off-handly dismiss the core issues" -- I really don't know how to respond to that.
Your issues are based on emotion and an abecedarian appreciation for the complexities of executive compensation. I'm not even sure what point you are trying to make when you say...
"Many members of this board own more shares than do management menbers [sic]"
I have been quite clear on this board (and the former club board on Raging Bull) that there is a distinct difference between being opposed to excessive compensation and being opposed to the selling of insider holdings.
Please take the time to differentiate between the two, and then you might be able to follow my reasoning.
Warm regards,
postyle
Menander,
Postyle, I'm not sure what it is exactly you are saying, but you have not addressed the core issues.
What exactly are these core issues?
Amount of shares owned?
With very few exceptions, the insiders own fewer shares than many members of this club.
Comparing the quantity of shares owned by insiders to the quantity of shares owned by members of an investment message board really serves no useful purpose.
The insiders sell as fast as they can.
This appears to be more of an emotional statement than a factual one. As stated publicly, the insiders have certain windows when they can make transactions without violating SEC regulations. Should a window be open and the share price up significantly from the past -- then perhaps they may process their transactions a bit swifter than usual.
But to say "as fast as they can" is not correct. Clearly, they could sell ALL of their shares on one day (provided they are vested). This doesn't happen. Therefore, they do not sell as fast as they can.
They probably would not do so unless someone winked at them and made them to understand that there is "a lot more where this came from." If so, and in my mind I'm pretty convinced it is so, then it amounts to a corrupt conspiracy, carried out at the expense of the shareholders.
I think you've watched too many Gordon Gecko movies. This is a strong accusation which you can not prove. Most likely because it is not true. Again, I sense these words to be emotional in nature, exactly as I explain in my original post.
http://www.investorshub.com/boards/read_msg.asp?message_id=897654
The view that this management has is that options are part of regular compensation, to be cashed in annually. This creates a disconnect in aligning management interests with those of shareholders. Management receives the EXTRA reward continuously,during the process,rather than after results have been achieved, results that would also benefit the shareholders. Thus, we lose the alignment of both parties' interests.
This is only partially true. There is a form of disconnection in aligning shareholder interests with management when sales take place. However, the continued granting of options makes interest alignment a perpetual event.
The widespread disposal of management shares recently made the Dow Jones Newswire, an uncommon occurance, and it was described in less than favorable terms. Moreover, one does not sell today what one believes will be worth much more within, say, one year. The entire situation is a bad one.
Perhaps in the short-term it is a bad situation. So if you're a trader or have leveraged yourself with options, it might be disconcerting. Again, as proven in previous posts on the subject, the long-term shareholder should realize that future and sustained stock performance is not going to be based on a news release about insider sales. Real revenues and real earnings will move the long-term valuation of IDCC.
Clearly, the items you have mentioned do not comprise the "core issues" of the long-term investor.
regards,
postyle
Once,
While it's true that last year's insiders sales were at prices lower than today, that is more a function of the fact that the share price wasn't this high last year but for two or three days.
LOL! Really?!? You certainly know how to state the obvious.
Insider sales from 2002 were at prices lower than today's price. That was the point.
The share price wasn't this high last year. Again, that was the point.
Can we not learn something from this?
The fact that insiders took such good advantage of the spikes there were is uncanny in itself, for heavens sake, look at the chart and the dates of insiders sales, amazing!
Do you think this is related to the size of the company and the number of existing shares available... or that these guys have the ability to move markets?
I believe the reason the price is higher now than last year is because of the expectations of the Ericsson settlement. The fact that the price didn't go even higher shows the market is not as pleased with this settlement as we were led to believe it would be.
I agree.
vg_future,
But they are killing the upward potential that the stock was showing. Hopefully they will give us something next week to munch on and forget the whole insider selling saga.
This was my point exactly.
I'm not going to speak for others, but for me, as a long-term investor who expects to see significant revenues based on 3G licensing and product revenues -- I don't get overly excited about short-term volatility.
If the stock is going to increase significantly, and sustain said increase, it's going to be based on earnings.
When options are given as compensation instead of salary (rather sometimes the top execs take these options to align their interest with the shareholders), disposing those options certainly says about what they think about the immediate future of the company...
That is incorrect. We can not make blanket statements about insider beliefs and certainly not with any certainty.
What good is compensation if the compensated party is not free to use/spend/divest/etc their compensation?
Why should an insider not be free to diversify, or make tax-planning and asset allocation decisions based on his personal portfolio? I will tell you that any financial advisor worth his own salt would recommend against having a highly concentrated portfolio (read: IDCC stock and options) especially when their future interests are already tied into the performance of said stock (read: they work for the company).
Clearly, there are issues at play that do not involve insider sentiment about the company - short or long term.
The juice is being sucked out of the news. Why should the street beleive in the potential of the news when the insiders seem to have doubts (hopefully I am wrong....please correct me if I am wrong).
I think it's a common reaction to see the sales and become disappointed. But if most people ask themselves why they are really invested in IDCC, they would probably discover it is not to ride the wave of short-term news announcements. But rather, they are invested in the company because they believe future revenues will increase.
Insider sales aren't going to influence future earnings...
...so the long-term stock performance will not be impacted by the sales in and of themselves.
Cheers.
postyle
Once,
I think the reason most shareholders are upset when there is massive insider selling is because insider selling almost always has a positive correlation with declining share prices. Insider selling is typically the event that marks the turn-around of rising IDCC share prices for many months to come. Of course just because it has happened that way so predictably in the past doesn't mean this time will be the same but it's a correlation that's too predictable to ignore.
I will grant you that there has been an uncanny connection between the two -- as you have illustrated.
But it exists only in the short-term.
Look at last year's insider sales:
2002 Price Now Holds
12/02 Bolgiano, D. Ridgely, VP Sold (D) 28,622 shs. $18.75-$18.75 126,476 direct shares.
11/27 Goldberg, Howard E., PR Sold (D) 6,400 shs. $17.88-$17.90 45,485 direct shares.
11/27 Merritt, William J., EX VP Sold (D) 8,091 shs. $18.41-$18.70 26,262 direct shares.
11/27 Fagan, Richard J., CFO Sold (D) 11,820 shs. $19.01-$19.08 24,379 direct shares.
11/18 Briancon, Alain C., CTO Sold (D) 10,000 shs. $15.64-$15.80 4,788 direct shares.
11/18 Colson, Joseph S. Jr, DIR Sold (D) 11,000 shs. $15.50 27,275 direct shares.
10/16 Goldberg, Howard E., PR Sold (A)(D) 6,667 shs. $9.67 45,485 direct shares.
10/16 Bolgiano, D. Ridgely, VP Sold (A)(D) 3,195 shs. $9.67 123,848 direct shares.
10/16 Lemmo, Mark A., EX VP Sold (A)(D) 4,667 shs. $9.67 36,480 direct shares.
10/16 Kiernan, Brian G., OFF Sold (A)(D) 4,334 shs. $9.67 44,745 direct shares.
10/16 Merritt, William J., EX VP Sold (A)(D) 5,000 shs. $9.67 34,353 direct shares.
10/16 Fagan, Richard J., CFO Sold (A)(D) 5,000 shs. $9.67 24,379 direct shares.
10/16 Tilden, Charles R., COO Sold (A)(D) 5,278 shs. $9.67 29,788 direct shares.
06/04 Campagna, Harry G., CB Sold (A)(D) 40,000 shs. $10.88-$11.55 290,000 direct shares.
Every one of last year's sales was at a price per share that is lower than today's closing.
I won't post the trades, but every one of the 2001 insider sales was at a price per share that is 1/2 to 1/3 lower than today's closing price for IDCC.
Obviously, there were some nice profits taken in late '99/early '00 -- but I think the point has been made.
hiya Bulldzr :)
you said, "I agree with ronnie and others re the seeming over the top insider sales and upper management compensation."
My question is why does this become such an issue after sales are reported?
Obviously we know these people are compensated with salary and stock options. But the moaning almost always comes after the selling.
Disagreeing with the overall compensation packages and the decisions by the compensation committee are one thing. Getting miffed because of insider sales is another. They are not the same thing.
Most people don't get mad when the company executives cash their checks. Exchange their company car for a newer model. Or expense their high priced meals and travel bills.
But the selling of the stock. Liquidating the option. That's what triggers the reaction of the individual investor.
One could answer my initial question (why does this become such an issue after sales are reported?) with the usual responses:
* sales display lack of confidence in future stock prices
* sales bring compensation issues to the foreground
* sales dissuade individual/institutional investors as well as analysts
To which there will be the usual rebuttals:
* insiders' confidence in future stock price increases is not measured in willingness to maintain highly concentrated net worth
* if it takes a sale to bring up the compensation issue, perhaps it was not that imbalanced in the first place
* most analysts/institutional side investors discount insider sales -- as mandated per empirical research
So, bulldzr, you're probably wondering... what's my point? Hehehe, I don't really have one point.
I just figured I would get this out of the way and save the need for future responses (at least my own responses). There are two sides to every coin, and this issue is no different.
But from where I am standing, me thinks the insider sales issue -- and the negative responses it generates -- is more connected to short-term performance than anything else. And of course, this short-term performance directly relates to the unhappiness of the average investor...
...even if he/she is not a short-term owner of the stock.
Bux,
As far as your claim that the $34 million 2G settlement is not a small number....Look at the survey Jim Lurgio set up just a couple of months before the settlement. The average amount expected by the participants here was a whopping $700 million! In other words, the settlement was only 5% of what the average expectation was!
To me that's proof that peoples expectations were way out of line while I consistently said I expected a nuisance settlement well under $100 million. Looks like I was amazingly accurate again!
I didn't realize you were talking about expectations. For a minute there I thought you were focused on analyzing this company and its current/future revenue streams.
But I see you are still fixated on blasting the bullish hopes of a few individuals (read: 34 million individuals).
Cheers.
postyle
p.s. Congratulations on your accuracy.
Bux,
what was previously billed as the telecom deal of the century, needing a calculator wif [sic] a lot of digits, hockey stick stock charts and all, was recently settled for a few million dollars and a "Memorandum of Understanding" that Ericsson is a highly ethical company and will make good on their promises some day...
The top 5 reasons why your facetious comments are misguided:
1) the calculator with a lot of digits was linked to potential 3G income, not a 2G lawsuit with ERICY.
2) the hockey stick analogy, once again, was linked to potential 3G income, not a 2G lawsuit with ERICY
D) $34 million (plus ongoing royalties) is not a small number (read: few) for a small cap company
Loop,
I assume anything is possible, but based on past events (going all the way back to the B-CDMA alliance to the recent arbitration results) I highly doubt they are the indemnifier mentioned in the 10-K.
All signs point to QCOM being the unspecified company.
Rox,
"The settlement gave Qualcomm license to freely use the technology"
"The Technology" being the patents of issue in 1994.
So if IDCC says QCOM is licensed for IS-95, CDMA2000, WCDMA and TD-SCDMA (read the 10K licensee chart) just because of the patents involved in the '94 settlement, and QCOM has free reign to include/license/indemnify them to others...
I think that's assuming too much based on the information we have. QCOM being licensed doesn't mean they can sublicense or indemnify... especially those rights that fall outside the scope of the original agreement (time division patents, post '95 patents, etc.).
Maybe Jim is right and there is a new deal in the works -- or will be one. Either way, based on each company's role in the marketplace, this is not a major issue in my eyes.
Cheers.
Rox,
you forgot this one...
..............................................................
QUALCOMM BENEFITS FROM NICE BREAK ON EVE OF 'BET-YOUR-COMPANY' TRIAL
10/14/1994
Information Law Alert: A Voorhees Report
Copyright 1994 Voorhees Report
It must be a lucky season for Qualcomm, the San Diego company whose pioneering work in digital cellular communications is on the line. On the eve of a "bet-your-company" trial, Qualcomm received good news from the U.S. Patent and Trademark Office. The office agreed preliminarily with Qualcomm that it may have been the inventor on three patents now held by InterDigital Technology Corp., its court rival.
While the development may not affect the outcome of the trial, it at least cast Qualcomm's case in a positive light for Wall Street. The stocks of the two companies moved in opposite directions on October 4, the day Qualcomm announced the patent office decision, sending InterDigital close to its 52 -week low of $2.
Qualcomm's announcement that the patent office had declared an "interference" on these three patents instantly put Qualcomm's court rival on the defensive. InterDigital's licensing chief Robert Bramson was on a conference call that afternoon for an hour and a half with analysts, investors, and reporters.
He emphasized that only one of the three patents was the subject of the upcoming trial and that the interference "will have no bearing on the outcome of our lawsuit against Qualcomm."
An interference is a complex judicial proceeding within the patent office meant to discover the rightful inventor of a device or method. An interference can be initiated by the patent office, when it is reviewing two pending applications or, as in this case, an applicant.
The patent office's declaration of an interference starts the process, which could take four years to complete. It does not, however, guarantee an ultimate victory for Qualcomm. There are only about 200 interferences declared a year.
InterDigital Technology's sole purpose is to get as much money as possible from a collection of patents on cellular communications. Its suit, which was scheduled to begin yesterday in federal court in Philadelphia, alleges that Qualcomm infringes three InterDigital patents.
SLIM CHANCE
Most observers view InterDigital's chances as slim. Qualcomm's name is synonymous with the cellular technology, known as code division multiple access, at issue in the trial, while InterDigital entered the so-called CDMA business only recently.
Still, Qualcomm cannot afford a loss, since its business, reputation, and self-image are so wrapped up in CDMA. "If we win the lawsuit, we put them out of the CDMA cellular business," Bramson says.
The trial is freighted with uncertainty because it is before a jury, whose members will be asked to comprehend ineffable engineering, and a judge, Harvey Bartle III, who has acted as if fast justice is better than orderly justice.
The trial is doubly important for Qualcomm because CDMA has had a longer gestation period than expected. CDMA systems won't be commercially available until next year at the earliest, more than a year after the arrival of its competitor, Time Division Multiple Access.
Both TDMA and CDMA are ways to squeeze a larger number of wireless calls into limited space using digital technology. The two methods are in hot competition for dominance not only in cellular communications but also the upcoming market of personal communication services. InterDigital also holds TDMA patents.
Normally, when a patent interference is declared, pending litigation on that patent is stayed. Ben Miller, Qualcomm's patent counsel, couldn't say whether his company would seek a stay.
Judge Bartle of the Eastern District of Pennsylvania has mercilessly pushed both parties toward trial and might look upon such a motion with disfavor.
There are three patents InterDigital claims Qualcomm infringes. One is a monstrous document, a half-inch thick with 224 separate claims, that InterDigital says covers both TDMA and CDMA. The second patent covers a method of handing off phone calls as a caller moves from one cell to the next. The third patent-the one in the interference proceeding-concerns the management of multiple simultaneous conversations over the airwaves.
DYNAMITE CHARGE
In the patent interference proceeding, Qualcomm will be able to raise an explosive charge that judge Bartle has so far restricted from trial-both the current one and an infringement suit Qualcomm levied against InterDigital, which begins later this year.
Qualcomm has twice tried to introduce claims that Donald Schilling, chief executive of InterDigital Technology's corporate patent, InterDigital Communications, obtained trade secrets from Qualcomm and used those secrets for commercial advantage.
Qualcomm believes that the inventions underlying two of the three patents in the interference derived partly from these trade secrets. InterDigital denies that the company or Schilling did anything wrong.
Qualcomm is also considering whether to file a separate suit to raise those charges.
TIMING
In the proceeding, Qualcomm has the advantage of having been named the "senior party," which simply means that it filed for its patents before InterDigital. By being the "junior party," InterDigital has the burden of showing that it actually was the first to invent.
Patents in interference no longer carry a presumption of validity, which is different from court cases. "Basically, we are in the driver's seat," says Miller, Qualcomm's patent counsel.
In InterDigital's favor, Qualcomm must show that its filings fully cover the InterDigital inventions.
Miller, Qualcomm's patent counsel, declines to say whether the company has sought other interferences on InterDigital patents. Presumably, the company has, for it is a far less expensive way to test an opponent's patents than litigation.
And it occurs before an administrative judge who presumably is better suited to understand the complexities of the technology than a jury.
Thanks, Rox.
"HOWARD GOLDBERG: John, that 1994 agreement has increasingly narrow impact. Certainly there were, within the scope of the cross-license, it accomplished some of the then important patents that InterDigital held, but the cutoff date was for 1995 as far as early in 1995 as far as included inventions and InterDigital has done a tremendous amount of work since that period of time and a lot of inventive work that has collectability (ph) to CDMA2000, as well as acquiring certain IPR (ph)."
This comes straight from the QCOM/IDCC agreement -- which of course we do not have access to. However, important portions of this agreement can be gleaned from the Neopoint Prospectus.
From that now infamous document:
"InterDigital Included Patents" means, with the exclusion of InterDigital's Excluded Patents, (i) every patent issued on or before March 7, 1995 (including utility models, but excluding design patents and design registrations) in the
world owned or licensable by InterDigital (including but not limited to InterDigital's Five Patents), and (ii) any subsequently issued patent (including utility models, but excluding design patents and design registrations) (whether issued to InterDigital or a third party) in the world owned or licensable by InterDigital which claims or discloses an invention contained in a patent application filed or acquired by InterDigital anytime prior to March 8, 1995
("Subsequently Issued InterDigital Patents"), and any counterparts (foreign or domestic) to any such Subsequently Issued InterDigital Patents whenever such counterparts are applied for, and (iii) any continuation, continuation-in-part
or divisional application based on any patent falling within (i) or (ii) above, whether such continuation, continuation-in-part or divisional application is filed during or after March 8, 1995. In the event of an acquisition of InterDigital by a third party, InterDigital Included Patents shall not be
construed to cover any patents or patent applications owned by such third party prior to the acquisition of InterDigital.
This is what Howard was referring to when he mentions the 1995 cutoff dates.
With QCOM being the indemnifier, we really have to revisit the Neopoint language and see just what limitations exist.
Other than the 1) 1995 cutoff date, we know of the 2) TDMA limitations:
No provision set forth herein shall be construed so as to
grant any right or license under InterDigital's Included Patents with respect to time division multiple access (TDMA) technology; provided, however, that such limitations shall not in any way limit any of the rights granted under this Agreement to utilize InterDigital's Patents to implement the CDMA (or non-TDMA) aspects of any Licensed Products, even if such Licensed Products include TDMA; provided, however, in such case only the non-TDMA use of such Licensed Product will be licensed under InterDigital's Patents. By way of example, if a Licensed Product can operate in both IS-54 (TDMA) and IS-95 (CDMA) modes, the use of such Licensed Product in the IS-54 TDMA mode would not be licensed.
...and the 3) non-QCOM ASIC limitation:
Products, as set forth in paragraph b. i. above, Licensed Products manufactured and Sold by LICENSEE which do incorporate CDMA ASICs purchased from QUALCOMM will remain licensed under InterDigital's Patents pursuant to Section 5.1.
...and the 4) spectrum limitation:
The license under InterDigital's Patents is limited to use
in Wireless Applications which spread the CDMA signal over not more than a 10 MHz bandwidth.
Besides these limitations, there is a provision (which Mickey recently alluded to) that is most interesting:
After November 2, 1996. If, at any time after November 2, 1996, LICENSEE (or its Affiliate) initiates a CDMA patent infringement lawsuit against InterDigital or its affiliates (or their customers) asserting that any product manufactured and sold by InterDigital for use in non-IS-95 based wireless applications infringes any patents and LICENSEE (or its
Affiliate) does not prevail in such lawsuit, then the license under InterDigital's Patents granted by QUALCOMM to LICENSEE under this Agreement, with respect only to Non-CDMA ASIC Licensed Products, shall immediately terminate.
Lots of good stuff to mull over in that Neopoint document. This is clearly a double-edged sword, so whichever party decides to take action should be prepared to shed some blood.
Link to Neopoint document: http://www.sec.gov/Archives/edgar/data/1101513/0001072993-00-000014.txt
postyle
Anything to make you happy, Bux.
Sounds fair to me, that is if Postyle is up to it....
The exact quote was:
"Jacobs allowed that there are contributions to the WCDMA spec from other manufactures that will impact their IPR claims include DoCoMo, Ericsson, Matsushita, Oki, Siemens and Interdigital."
http://www.mobilestreams.com/show_press.asp?link=93
Bux,
"You can expect to see me participate more as my previously stated views are illustrated and reinforced by actual events as they unfold."
How many times can an individual pat himself on the back before he inflicts physical damage? {g}
Seriously, why must you continue to refer only to those issues where your analysis has proven correct -- yet refuse to acknowledge where you were wrong? Since you are a master at ambiguity, at the very least you could give credit to the bullish investors who have seen their analysis validated over time.
Bux,
"anyone who has followed this debate will know who has been eerily accurate and who has been making dreamy but misguided predictions..."
I have a rather large archive of previous comments regarding this debate that goes back for years. Do you really want me to display what the true meaning of "accuracy" is?
I see a few new names on this board, but quite a lot of familiar ones. Glad to see so many of you are still around and have been able to see this thing through to the present.
I haven't been following the company as close as I used to, but I'm still on board and pleased with recent events. JimLur has been kind enough to send newsworthy items my way every so often, which I have appreciated.
Cheers.
postyle
p.s. I trust the complaints regarding the compensation committee have disappeared? {ggg}