InterDigital Inc (IDCC)

[blueskywaves]

I know some quants that do not try to measure subjective factors like management in the interest of keeping the numbers "pure," but I'm still not persuaded that this can be done effectively with technology companies because of the obsolescence factor.

For example, the board of directors is responsible for authorizing option grants and other compensation issues through the Compensation Committee. The record clearly shows that IDCC's board made a conscious decision to increase R&D dramatically after the devastating 1995 Motorola loss.

IDCC spent a mere $24M in R&D in the 3 years (1992-1995) after the 1992 merger of its TDMA patent portfolio with SCS's CDMA patent portfolio. It spent $63M in R&D for the 3 year period from 1996 to 1998 (before the Nokia deal) and $138M in R&D from 1999 to 2002 (after the Nokia deal and before the Ericsson settlement). Note the progressive increase in R&D spening after each level of accomplishment.

The direct results of more than $200M in R&D spending since 1995 have been IDCC's increased influence in the 3G standards committees and the dramatic increase in CDMA patent production -- built on the foundation of the Schilling CDMA patents --, which both increase the likelihood that IDCC will be able to monetize its CDMA portfolio successfully. I doubt that a quatitative approach would have captured all those tangible and intangible benefits.

I don't think anyone can credit those developments entirely to IDCC's engineers and scientists because very smart people tend to do very stupid things to each other without very smart management to keep these inventive types focused on the business plan. If one accepts that premise then one can understand the very high degree of difficulty of the recruitment process after the Motorola loss.

I also don't think anyone can be constructive about IDCC's business plan without understanding how this management team views and uses R&D since R&D will clearly play the crucial role as IDCC completes its turnaround and starts to grow.