Replies to post #28433 on InterDigital Inc (IDCC)

[revlis]

Compensation of Directors



Each nominee for election to the Board of Directors who is not an officer or employee of the Company (an “Outside Director”) is entitled, upon election or re-election at the Annual Meeting, to receive a grant of non-qualified stock options to purchase shares of Common Stock under the Company’s 2000 Stock Award and Incentive Plan upon their election or re-election to the Board of Directors by the shareholders. These options are granted automatically at the conclusion of the Annual Meeting and provide for the right to purchase 48,000 shares of the Company’s Common Stock (calculated as 16,000 multiplied by the number of years for which the Outside Director was elected to serve), at an exercise price equal to the fair market value of the Common Stock on the date of grant. The options vest one-third each on the date of each subsequent Annual Meeting of Shareholders. Outside Directors who commence service prior to the election of their class receive prorated option grants based on the time remaining prior to the election of their class.



Outside Directors are also entitled to an annual monetary director fee of $15,000 for a full calendar year of service. A pro-rata portion of the $15,000 fee is paid for service of less than a full year. Payment of fees may be made, at the election of each Outside Director, on January 15 of each year, quarterly or deferred. The Company also reimburses Outside Directors for certain expenses incurred in attending Board of Directors and committee meetings and travel on behalf of the Company.



In connection with his service as Chairman of the Board of Directors during 2002, in 2003, Mr. Campagna was awarded 50,000 restricted stock units (“RSUs”). Such RSUs are generally forfeitable if Mr. Campagna ceases to serve as a director before the RSUs vest 2 years after their grant date, do not have voting rights, and are not deemed to be outstanding shares.


If I read the above correctly, none of the additional 5 million options will go to the BOD and HC whose compensations are set. There are ample options now available to satisfy their compensations as set forth in the above statement. The question is who changes the compensation of the BOD? The shareholders or the BOD?



Jerry

[rmarchma]

Revised compelling reasons for owning IDCC stock

DannyD you are correct in that technology is not the only reason why I continue to own IDCC stock. Made me rethink and revise all my compelling reasons for owning IDCC as follows:

Fourteen Compelling Reasons for Owning IDCC Stock Revised

1. IDCC has “essential” and “commercially important” patents in all modes of the 3G standards including DECT, EDGE (IS-136), CDMA2000, WCDMA-FDD, WCDMA-TDD, and TD-SCDMA. Any company that makes a 3G compliant phone/device should owe royalty to IDCC. This fact has been reiterated in quarterly conference calls and the annual reports.

2. InterDigital also has essential IPR in additional wireless standards, other than 3G, including 2G (GSM, TDMA, TETRA, PDC/PHS, CDMAOne/IS-95), 2.5G (GPRS, EDGE, CDMA2000 1X), 802.16, and possibly 802.11.

3. The Phase 2 part of the Nokia partnership began on Jan. 1, 2002. Phase 2 will eventually involve ongoing/recurring royalties payments to IDCC on all handsets/devices and infrastructure sold by Nokia, the world’s leading wireless phone manufacturer (over 35% market share), and also a leader in wireless infrastructure equipment. The finalized royalty rate for 2G/2.5G GSM/GPRS and other TDMA-based standards will be based upon the royalty framework established in the recent Ericy license. IDCC has publicly estimated Nokia’s royalty for these standards alone to be $100m to $120m for 2002, and $80m to $90m per year for 2003 and 2004. These projected amounts to not include a yet to be determined 3G rate or 2G/2.5G CDMA rate from Nokia for these other standards, which they have already licensed.

4. Samsung is licensed for 2G/2.5G TDMA-based standards and will probably pay whatever the finalized royalty rate that Nokia pays by virtue of their MFL clause effective back to Jan. 1, 2002. IDCC has publicly estimated that this could amount to $22m to $27m for 2002, and $20m to $24m per year for 2003 and 2004. These amounts do not include a possible future 3G contract or a 2G/2.5G CDMA license.

5. Ericsson litigation is finally resolved. Ericy agreed to a $34m settlement for prior usage of 2G/2.5G TDMA-based standards through 2002. Ericy also agreed to pay $6m per year for the next four years for 2G/2.5G TDMA-based infrastructure. Ericy/Sony paid a $26m two-year advance for 2G/2.5G TDMA-based handsets. These amounts do not include a possible future 3G contract or a 2G/2.5G CDMA license.

6. Almost $100 million in cash (about $2 per share) at 3/31/03, virtually no debt, and significantly increased the engineering staff since 2000. IDCC has publicly stated that they expect to receive between $360m to $430m of additional cash within the next 12 months from Nokia, Samsung, and Ericy.

7. More 3G contracts should be following Matsushita with their $19.5 million advance royalty, and Sharp with their $11 million advance fairly soon. NEC with their $19.5 million royalty advance, Japan Radio, Tantivy, and Hop-On all signed 3G licenses in 2002. NEC settled the arbitration dispute over past 2G royalties for $53 million, and in addition to the settlement amount, signed a new 3G contract with a royalty advance of $19.5 million.

8. More 2G licensing momentum should be following the Ericy resolution in 2003 led by Ericy/Sony with their $26m 2G advance. Many other 2G infringers should be licensing with IDCC fairly soon. The triggers for signing these other companies will be the Ericy 2G resolution, the NEC 2G settlement, and/or the need for 3G licenses.

9. Recurring royalties are improving dramatically. The year 2002 marked the first time in which IDCC recorded earned revenue from some of the 3G prepaid advance royalties, in addition to having a significant increase in 2G recurring royalties. The Ericy resolution in 2003 has already produced another 2G ongoing revenue stream of approximately $4m to $5m per quarter. Rate finalizations for 2G with Nokia and Samsung should generate at least $25m per quarter in additional ongoing revenue streams beginning in 2003 according to IDCC’s public projections.

10. Unprecedented 10 year chip agreement with Infineon, a world leader in wireless chips. IDCC and Infineon expect to complete the full multi-mode 3G FDD protocol stack no later than the first quarter of 2004. The dual-mode 2G GSM/GPRS and 3G FDD chip should be ready for the commercial market in 2004. IDCC is also developing several other TDD-based products for the emerging 3G market.

11. The WTDD mode, used in conjunction with FDD, is most likely to be the dominant 3G technology according to most industry experts and wireless companies. The benefits of WTDD include superior asymmetrical data-handling capabilities, spectrum efficiencies of 20% - 35% that will significantly allow for more system users, and more/richer 3G applications at lower incremental costs. IDCC owns substantial essential IPR in WCDMA and has partnered with Nokia and Infineon to further develop this technology

12. IDCC is very actively involved in various worldwide organizations, such as, the UMTS Forum, the GSM Association, the TD-SCDMA Forum, and the TDD Coalition, which promote and inform the wireless industry. These organizations are composed of the leading equipment manufacturers, chip producers, telecom operators, software developers, wireless IPR owners, and other interested suppliers and parties. This active involvement further enhances IDCC’s growing reputation as a leading company within, and a major supplier of enabling technologies to the wireless industry.

13. Institutional ownership in IDCC has recently increased significantly from under 20% to over 30%. Several more analysts are now participating in IDCC’s recent conference calls, which should translate into increased analyst and media coverage in the future.

14. IDCC is strategically positioned within an explosive industry, which is projected to generate astronomical future revenues, and offers superior value over its competitors.

[sophist]

To DannyD: Great post on Rmarchma's comments in msg# 28376 this morning. I especially wonder about his statement that my decision to sell will be based not upon my assessment of management, but upon my assessment of the underlying technology.

This appears to be a fairly common sentiment on this board, to which you replied that "the 'underlying technology' does not have a mandate to build shareholder value, management does." And you questioned the wisdom of his minimizing, if not ignoring, the critical role of assessing management performance in making a decision to sell.

What puzzles me somewhat is this: If Rmarchma has so minimal regard for the role of management in contributing to the realization of his well articulated "Fourteen Compelling Reasons to Buy IDCC", why has he invested so much time, effort and energy in trying to push a "reform of Management agenda"? Why such a pre-occupation with governance issues that have little to do with the "underlying technology"? This juxtaposition of word and deed somehow makes me think that Rmarchma is being somewhat disengenuous.

His formulating and posting of many "Concerns and Issues" that almost all deal with the failings and problems of Management, combined with his occasional efforts at activism and organizing on a grand scale, has stirred many people both on and off this board to complain about, criticize and confront Management on all sorts of issues we have all become familiar with, sometimes to the exclusion of almost any other topic, including the presumably all important "underlying technology".

What on earth is the point of all this management-focused effort, with all the friction, disharmony and distraction it generates, if he really believes that an assessment of management is not a significant factor in his decision to buy or sell IDCC? Can someone please explain this to me? The cognitive dissonance arising from my trying to square this circle is beyond my ability to dispel.