Glenny...FWIW, this is a copy of a letter I sent to the Board on April 29.
April 29, 2012
Board of Directors
InterDigital
Dear Sirs:
While I am certain that you receive numerous letters on a daily basis suggesting how you should run our company, and at the peril of being cast as just another armchair director, I nevertheless am compelled to offer three suggestions. These recommendations are in keeping with management’s continued mantra of “building shareholder value” and comprise the sum total of knowledge and experience gained from my 45 years as an investor in small to mid-sized public companies, and 20 years as a money manager and broker focusing on same.
1) Reinstate a Shareholder Rights Plan. This needs to be done immediately. I was a shareholder (and have been since 1994) when the first rights plan was instated but I do no recall whether it was enacted by the Board alone, or if Shareholders’ approval was required. In any case, I believe it imperative that this be done, even if it requires an amendment to this year’s proxy. I am sure that you are aware that the current stock price does not reflect the inherent value of the Company. Much of this has to do with trading rules that have changed in the past five years and existing rules which are subject to being ignored due to lax enforcement. The result has been that stock prices of companies, the size of InterDigital, have easily been “managed” by hedge funds and others. Be that as it may, the Company, is in danger of being taken out at an inappropriately low price. I fear that the Board would have a difficult time fighting and overcoming an unsolicited bid of, say, $40. Allowing this to happen, by not instituting a rights plan, would certainly be contrary to the mandate of building shareholder value. I believe a minimum trigger price should be no less than $80 per share.
2) Authorize an Additional $200M Repurchase of Shares. Consistent with Mr McQuilkin’s repeated assertion that the Company views an amount of $200M to be adequate for operating capital, and given the fact that the Company currently has a cash balance in excess of $600M and is expected to be cash-flow positive for the year, one would be led to infer that, at the least, $400M is available to increase shareholder value. For these same reasons, my final recommendation is:
3) Issue a One-time, Special Dividend of at Least $4.00 per Share. While implementing 2) and 3) would equate roughly to the implied $400M available for returning capital to shareholders, the Company has stated that the sale of non-core intellectual property is imminent and would generate substantial additional cash.
I am sure you are aware that the Company has enemies, some of whom are determined not to allow InterDigital to take its rightful place in the industry. The continuing over-sized short position in the Company’s stock is emblematic of, and correlated to, this ongoing endeavor. The recommendations I submit here will further the Company’s goal of building shareholder value and, as a side benefit, complicate and potentially thwart these nefarious efforts; which would, in turn, be yet another way to increase shareholder value.
The above suggestions are totally consistent with managements’ stated ongoing commitment to increasing shareholder value. In fact, in appraising the universe of possible actions that could be initiated to accomplish this goal, I am at a loss as to the existence of any other steps that could be taken. If there are other strategies that exist, I would like to know what they are.
I appreciate your efforts on behalf of the Company and its shareholders and hope that you can successfully negotiate the path toward realizing the goal of maximizing shareholder value.
Sincerely,
AI
