InterDigital Inc (IDCC)

[blueskywaves]

I'm curious nobody has commented on this.

IDCC exited 2002 with $88M in cash/investments and 1Q2003 with $95M in cash/investments. It would have exited 1Q2003 with less cash than 4Q2002 if not for the net CASH proceeds from option/warrant exercises/ESOP of $7.8M. These include the proceeds from insider activity earlier in the year that caused so many individual shareholders to panic.

1Q2003 recurring royalties were $17M. $11M of that total came from the DEFERRED REVENUE account in the balance sheet through the DEFERRED REVENUE RECOGNIZED line in the cash flow statement. That $11M is cash that has already been collected through prepaid or paid-up contracts so the actual amount of cash royalty income that IDCC collected during the quarter was only $6M.

Total operating expense for 1Q2003 was $20M Actual cash royalties of $6M accounted for 30% of total operating expenses for the quarter. Option exercises of $8M accounted for 40%.

But should this be surprising?

IDCC spent a total of $250M in operating expenses from 1999 to 2002. It generated $40M in cash from option exercises during that same time or 16% of total opex. IDCC would have exited 2002 with ONLY $48M in cash/investments if not for the $40M in cash/investments generated by option/warrant/ESOP from 1999 to 2002!!!

Think about this carefully. Without the option exercises from 1999 to 2002, IDCC would have conducted final negotiations with ERICY or gone to trial with only $48M in cash/investments and an operating expense structure of nearly nearly $80M for 2003, most of that in cash!!!

For some perspective, look at how QCOM elevated its liquidity position after the March 1999 settlement with ERICY. QCOM generated $1.313 BILLION in cash proceeds from option exercises in 1999 when it was the best stock performer in the entire market. QCOM's cash/investment account went from $303M in 1998 to $1.7B in 1999 considerably strengthening their ability to collect royalties and sign new deals.

Not surprisingly, QCOM started to generate more cash from its operations than cash from its balance sheet maneuvers (including option exercises) after the 1999 settlement. Before that 1999 landmark settlement, QCOM generated more cash from its balance sheet maneuvers than cash from its operations despite the fact that they grew sales tremendously from $107M in 1992 to $3.3B in 1998.

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