Replies to post #29758 on InterDigital Inc (IDCC)

[rmarchma]

Mschere re IDCC fully diluted earnings

Here is what I think is a possibility for 2003, assuming a full year of Nokia and Samsung, as I have previously posted:

If all of the 10.7m outstanding options and warrants at 12/31/02 are exercised, then IDCC's shares would be 56.3m +10.7m additional = 67m. The dilution factor would be 67m - 48.4m = 18.6m increased shares divided by 67m total = 28% of the total shares. If IDCC's stock price would have gone to $50 per share before dilution, the 28% dilution factor will cause the stock price to be at $36 per share.

This dilution cost to the shareholders can be verified through earnings per share calculations using 48.4m shares before any dilution and 67m shares after full dilution. If IDCC's Net Income = $150 million after Nokia, Samsung, and Ericy/Sony, then earnings per share = $150m divided by 67m fully diluted shares = $2.24 per share x 20 PE ratio = $44.80 indicated price per share. If the same $150m Net Income was divided over 48.4m shares before any dilution, then EPS = $3.10 per share x 20 PE ratio = $62 indicated price per share. The indicated share price has been reduced by $17.20 divided by $62 or 28%, which is the dilution factor. This same calculation would hold true no matter what PE ratio or what amount of Net Income one assumes.