InterDigital Inc (IDCC)

[Corp_Buyer]

Ronnie, thanks for your thoughts on Cash Flow. I especially appreciated your point about market risk and prepayment advances.

With respect to NOL, we agree that using NOL will benefit the CF and as such it will help to achieve the CF targets for bonus payouts (unless the NOL tax benefit has been factored into the CF targets i.e. added into the targets).

However, my point is that using the NOL is DISCRETIONARY, not mandatory, and it seems management has ELECTED to not use the NOL when we have had income in the past e.g. last quarter. You previously mentioned that management's election to not use the NOL seemed strange:

"The NOL carryforward is NOT being applied in the quarterly earnings thus far by IDCC. Evidently IDCC is expecting the Nokia royalties to use-up all of the NOL carryforward in 2005, and is ignoring the NOL utilization on a quarterly interim basis.

...'The effective Corporate Tax rate that IDCC stated for 2005 of some 35% or so, is confusing to me..and I would hope to others as well'

Very confusing to me also. This effective rate has to be after the full utilization of the NOL carryforward by the complete reversal of the deferred tax asset valuation allowance. Therefore, IDCC must be assuming that they will fully reverse the valuation allowance this year. However IDCC has not yet fully reversed the valuation allowance, and appears to me to be waiting on Nokia royalties before actually doing so. "

http://www.investorshub.com/boards/read_msg.asp?Message_id=7689906&txt2find=nol

I just raised the question that maybe management is deferring using the NOL until it benefits them personally to use it, from a CF bonus target perspective?

Another way to look at the newly created LTCP over 2004-2005 is that management, at their election and actions, via the LTCP, have jacked up their own compensation (without reasonable basis IMO), crushing approximately ALL of the earnings up to the point that the NOL can't be used, since there are no significant earnings left after all this excessive "compensation".

Due to the LTCP we have about $25M in grants for 2004-2005? With about $15M of those grants expensed in 2004-2005, just for the LTCP, that OTHERWISE would have been much needed EARNINGS?

And, as you point out, the ISO plan is still in effect and ISO grants are still NOT expensed by the company. Personally, I would have preferred if the company did not create the VERY EXPENSIVE, NEEDLESS and excessive LTCP and instead switched to expensing ISO and granting them thoughtfully and reasonably, which is what I believe shareholders intended when we voted to defeat management's request for additional ISO compensation in 2003.

Any further thoughts on these matters?

MO,
Corp_Buyer