InterDigital Inc (IDCC)

[blueskywaves]

Many of the people like you who complain about the twin issues of dilution and executive compensation don't seem to have a very rational basis for comparison. That's because the IP operating model is very, very difficult to execute.

As an exercise, name one, just ONE company that has ever generated more than $7 per share in cumulative royalty income from the start of its corporate life to 12/31/2002.

Then name one, just ONE company that has a shot at generating more than $7 per share in cumulative royalty income during the next four years.

See what I mean?

Regarding dilution, compare IDCC (55M shares) with RMBS (98M shares) and ARMHY (338M shares) to see the flimsiness of this claim. At their respective peaks in 1999, ARMHY had a market cap of more than $5B, RMBS had a market cap of more than $25B while IDCC had a market cap of more than $1B. Needless to say, insider selling at IDCC, ARMHY and RMBS also peaked in 1999.

Regarding executive compensation, the only person to come up with a rational framework for judging the level of executive compensation was Ronny, but his analysis was flawed by the use of Fortune 500 levels of compensation as a starting point when other companies with significant royalty income like ARMHY, RMBS and even QCOM were available for comparison.

As an example, here's a comparison of C-level salary and bonus levels (excluding options) at IDCC vs RMBS circa 2002.

    
       
                                 RMBS         IDCC 
 ..... 
 ..... 
 Chairman of the Board            --           -- 
 CEO                           $ 616K          -- 
 President                       577K        $ 659K  
 COO                              --           339K 
 CFO                             441K           NA 
 General Counsel                 365K        $ 354K 
 

Note: Rambus has a CEO and President while IDCC has a President and a COO (Chief Operating Officer).

Rambus has TTM revenue of $102M, 98M shares out and most of its major litigation (patent and anti-trust) in front of it.

IDCC has TTM revenue of $88M, 55M shares out and most of its 2G litigation behind it. As a result its revenue is expected to go from $88M in 2002 to $150M-$200M in 2003 and its cash/investment account is expected to go from $88M in 2002 to a projected $400M+ in 2003.

Lastly, compare the annual returns of both companies during each of the last 5 years, a period of time that includes the blow-off market top in early 2000 and the probable market bottom in mid-2002.

Now tell any rational person that IDCC's compensation policies are excessive compared to its peers in the IP business.