This makes no sense, but lots of dollars
What a sweet, sweet day. After weeks of the share price languishing at levels that had me questioning my sanity, today, with the markets off 4%, we get the "bad" news that IDCC is writing off the SlimChip. So what happens? We pop 20%. If all I knew was the market and the press release, I'd be hoping to stay out of the teens today. While I understand that this is a good thing long term (reducing expenses), given the market's recent ability to ignore any positives in IDCC, I would've been very nervous about the price action today. WTF is going on?
My only guess is that the shorts could see the SlimChip write off coming, and were shorting IDCC heavily in anticipation, shorting on the rumor and planning on buying on the news. When the news hit, IDCC did an OUTSTANDING JOB of focusing on the reduction of recurring expenses and pointing out the one time charge would be largely non-cash, which translates into higher net income for continuing operations and increased cash flow for 2009 from the restructuring. Therefore the market saw this as a positive, and the shorts, who were waiting on this news to cover, were disappointed to find that the news did not cause the selling they were expecting. At this IMO ridiculously low share price, there are not many looking to sell. With no other negative catalysts on the horizon, they have to cover. Just thought of one more thing...IDCC may have been waiting for the release of this news to begin their buyback, so that may have ignited the rally today. Glad to see I'm not the only one who gets fooled by the short term irrationality of the market.
For the conspiracy theorists out there, let me throw this idea out there. Rakitno shows up on this board to state with near certainty that the SlimChip is not going to be written off. Accountants, like attorneys, rarely speak in such absolutes when discussing future events. When asked to clarify and when presented with well reasoned opinions that the lack of any impairment at 12/31/08 did not assure the viability, he steadfastly stuck to his guns, never backing down an inch. Why did he show up here, pushing his "positive" opinion, calling himself an accounting expert and relentlessly refuting anyone who stated that the write off of the SlimChip was not nearly as unlikely as he stated? Maybe he is a short who wanted to build up the hopes of shareholders based on the SlimChip sale or product revenues, so that when this news hit, disappointed investors would sell into his friends’ short covering buying. For those who got so upset about some folks misspelling Rakitno's handle, in retrospect it may have been an accurate Freudian slip.
What I love about JimLur's board is the variety of smart and experienced people from many fields that contribute here. I look to opinions of folks who look at all the facts and give their opinions based on their expectations based on those facts, not their hopes. When RMarchma talks about accounting, I listen. His earnings projections have been more accurate than any others. IDCC often has unsuspected items which cause differences between Ronny's numbers and the actual, but his estimates are easily reconciled to the actual. When Olddog gives an opinion about anything, I listen. He does his research, he looks at all the information and when he offers his opinion it is well thought out and logical. So I will put much more stock in posters like Olddog and RMarchma than some newbie who's impeccable credentials are top secret - just trust him. Olddog, RMarchma, Data and Tom Carpenter are not always right, however they are just as likely to be too positive as too negative, and they are often very close to actual results. If you want to get a good feel for the future follow their posts and others like them. If you just want to work on your seating arrangements for the 2009 Houston 100 there are a number of other posters you can follow and +1.
Frank
