InterDigital Inc (IDCC)

[Corp_Buyer]

The 1Q sell-in may NOT be happening as expected.

Ronnie- I always enjoy your perspectives. Thank you for providing the transcript of statements on 1Q inventory restocking. I rearranged some of the lines to highlight my concern:

"there needs to be a lot of sell-in in Q1 to replenish ... there is very little inventory in the channel right now";

"We didn't have that build-up like we've had over the last few years" - this is an indication to me that UNLIKE prior years and unusually, the channel this year is NOT being restocked right now and this is what worries me.

"we will get a much better handle on that as we receive royalty reports AFTER Q1" - which seems to indicate that there is still HOPE, like you suggested: "major replenishments will actually occur in March".

Now, I combine the above remarks about the LACK of inventory sell-in with what I see locally, which is that I, like many others on this board, bought a new cell phone in the 4Q, but who here has mentioned buying a new phone since then?

Also, I have noticed that the carriers have greatly cut advertising all the way to zero until just recently I have seen a couple of TV ads from Verizon (Trump). I have not noticed the cell phone push ads from Best Buy, Circuit City, Cingular, etc, etc. like I saw in the 4Q. This means that nobody, except Verizon very recently, is actually pushing phones. Do you remember the advertising, rebates, and pushes to sell phones in the 4Q? Well, that push seems to have dried up in 1Q04, from what I can see locally.

Add in ANOTHER significant sequential quarter cost increase and all together, unless the NEC revenue catchup and some other one-time revenues can offset the cost increase and seasonal revenue shortfall, it looks like the 1Q could be ugly from an earnings perspective, however, cash flow looks to be strong due to advance payments.

My experience makes me very cautious to "hope" that revenues will make a company profitable. That is why I am so concerned about our VERY significant and still continuing cost increases:

http://investorshub.com/boards/read_msg.asp?message_id=2634441

Incidentally, does anybody have any comments on these cost data comparisons (YE 2003 vs. 2002) showing that DEVELOPMENT spending went down (presumeably including the Tantivy key people) while G&A and Marketing went up 19% and 15% respectively? Patent Administration and Licensing costs increased 22% which probably includes the litigation costs so that does not concern me. However, why should our overhead costs INCREASE so much while DEVELOPMENT actually DECREASED?

Best regards,
Corp_Buyer