InterDigital Inc (IDCC)

[blueskywaves]

Thanks for the usual thoughtful response, Ronny.

What I advocated was a comparison to other small-cap technology companies.

I agree. However, a comparison to other small-cap technology companies is only useful if you also perform a comparison of IDCC versus other small-cap tech companies with reasonably COMPARABLE licensing models. I don't see RMBS and ARMHY in that universe of small-cap tech companies so I think that's misleading. Even adding a dividend-paying big cap like QCOM to that universe would be useful since it is the most successful generator of royalties after IBM.

As many have pointed out repeatedly, the licensing business plan is more difficult to implement than a fabless chip business plan or a software business plan. That's why we have a very small universe of companies with significant royalty income.

For instance, one unique risk of licensing business plans is litigation. Common sense tells you that those litigation risks severaly handicap a company's ability to compete for managerial and technical talent so the proper comparison for executive compensation should be among companies with similar handicaps, companies which have to pay higher levels of compensation because of the higher risks associated with litigation.

I also think you need to bifurcate salaries/bonuses/others (fixed compensation) from options (variable compensation). Why? IDCC has outperformed QCOM, ARMHY and RMBS in the last 2 years and created more shareholder value than 95% of all technology companies in the last 2 years so its options have become more valuable. Yes, I know that FASB allows companies to reprice underwater options under the 6 months plus 1 rule, but that only serves to contrast the fact that IDCC has an executive options program because it has created genuine shareholder value in the last 2 years while its peers in the licensing business have an executive options program despite the fact that they have NOT created shareholder value in the last 2 years.

Using those two metrics, IDCC's salaries/bonuses/others DO NOT appear to be out of line with its peers in the royalty business. I do not think you can adequately judge IDCC's options plan without relating it to its stellar stock performance during the last 2 years and that performance speaks for itself.

Overall, I do not think IDCC has excessively diluted its stock
and wasted money on its compensation programs. Again, compare IDCC's total 60M-70M shares with QCOM (800M+ shares), ARMHY (338M+ shares) and RMBS (98M shares). Go deeper and compare the number of shares outstanding to revenue levels to get a balanced perspective.