Replies to post #163763 on InterDigital Inc (IDCC)

[captainslog]

So, contrary to what the company is saying, the buyback is not in the best interest of the shareholder, but in the best interest of officers and option holders?

Wasn't CorpBuyer saying something like this?

Because they couldn't get more treasury shares added, they decided to do an end run and a very expensive end run at that and buy back shares to give to officers and employeers and a fire sale discount.

The company pays full price for shares and then turns around and give them away at fire sale prices.

Do have that all mucked up or am I tracking?

[Learning2vest]

Dave, no surprise here as my expectations have always been that IDCC's buyback program would play out the same way most of them do in "tech land", i.e., just serve as an offset to the ownership dilution caused by options granted to the shareholder's "employees"(*).

(*)- I'm including Harry, his board members, and everyone else with their snouts gourging way too deeply into our KOP options trough in the ref assessment. That greedy crap has not become a show stopper for me(...yet!), but it's troubling enough to mention.

[rmarchma]

Dave re weighted outstanding shares you said:

...."Bottom line: Don't expect the number of outstanding shares (basic or diluted) to go down anytime soon."

You have misinterpreted this. The weighted average outstanding shares for both Basic EPS and Diluted EPS will fall by at least 3 Million shares each in the third quarter, approximately by the same amount of shares repurchased in the second quarter. You might want to read a couple of my reposts on outstanding and weighted shares as follows:

Posted by: rmarchma
In reply to: mschere who wrote msg# 162452
Date:7/19/2006 4:04:44 PM
Post #of 163769

Mschere re IDCC's outstanding and weighted average shares you said:

..."The next 10 Q...or the Actual earnings report may provide the actual share number utilized"

The number of weighted average Basic shares outstanding and the weighted average Diluted shares outstanding are directly provided within the Income Statement of the IDCC's quarterly earnings report press release. We do not have to wait until the 10Q Income Statement is released in order to find this info. BTW the weighted shares outstanding for the First Quarter were 54.8m Basic and 56.9m Diluted.

However we do have to wait for the 10Q Balance Sheet in order to determine the outstanding shares at the end of the quarter, as this info is not provided in the Balance Sheet of the quarterly earnings report press release. BTW at the end of the First quarter, March 31, 2006, IDCC had 54.0m Outstanding Shares composed of 60.5m Issued Shares less 6.5m total Treasury Shares.

The real difficult part is trying to project basic and diluted weighted shares outstanding for the Second Quarter, before the numbers are actually provided by IDCC. There are several things that will be affecting IDCC's weighted average outstanding shares during the second quarter as follows:

(1) The company share buyback will reduce the outstanding shares, but the magnitude of the reduction depends upon the actual number of shares repurchased and exactly when did the repurchases occur during the quarter. We know that the company's $200m buyback has the potential to ultimately reduce shares by about 15% when the buyback is completed, or by approximately 8m shares (based on IDCC's stock price during the May CC).

Only 10% of the buyback had been completed as of the May CC. We really don't know the extent of the company buyback after that point. If the company is using a 10b5-1 predefined trading plan for the buyback at preset prices, then we might not have had much buying activity during the latter part of the quarter at the relatively higher prices. Also remember that shares purchased toward the end of the quarter will not affect the weighted average outstanding shares for this particular quarter, as much as shares purchased at the beginning of the quarter.

(2) A good bit of the latest insider selling was accomplished by exercising stock options to acquire additional shares, and then selling the shares on the open market. This will increase the Basic outstanding shares. This selling activity occurred toward the end of the quarter, so its impact upon increasing the weighted average will not be as great for this particular quarter though.

(3) IDCC's relatively high stock price at the end of the second quarter of almost $35 per share will have some impact upon the Diluted shares outstanding, but not the Basic shares outstanding. In the calculation of Diluted weighted average shares outstanding, in-the-money stock options are added to the share number, but not the out-of-the-money stock options.

Since IDCC's highest outstanding option strike price is $39, most all of IDCC's outstanding stock options were in-the-money at the end of the second quarter. This could possibly add up to another 1m shares maximum to the diluted number according to my preliminary estimate this afternoon, albeit based on incomplete information. I'll probably have to do more research to get a better handle on this.


Posted by: rmarchma
In reply to: mschere who wrote msg# 162412
Date:7/19/2006 9:15:34 AM
Post #of 163768

Mschere re outstanding and weighted average shares for EPS calculations

I noticed that Olddog posted a good general answer last night to your following comment:

..."Of course IDCC must have bought back some stock by the end of June to decrease the 56 million weighted shares"

I'd like to add a little more to his response with some simple numbers for illustration purposes. Suppose that a hypothetical company had 50m outstanding shares at the end of the first quarter. Suppose the company then bought back 20% of their outstanding shares during the second quarter or 10m repurchased shares. The outstanding shares at the end of the second quarter would then be 40m shares. Thus outstanding shares are determined at one point in time, ie the last day of a quarter.

However the weighted average shares used to calculate earnings per share is based on the average shares outstanding throughout the entire quarter. If the 10m repurchased shares had been purchased exactly in the middle of the quarter, then the weighted average for the quarter would be 45m shares. However if the 10m shares at been purchased on the last day of the quarter, then the weighted average for the quarter would be just slightly under 50m. It would actually be 49.9m weighted shares, using 91 days in the second quarter, calculated as follows:

50m outstanding shares x 90 days = 4,500m
40m outstanding shares x 1 day = 40m

4,540m divided by 91 days = 49.9m weighted average shares

[dmiller]

This is what I've been saying from the beginning. Buyback is to mask the huge dilution by the greedy mgt's options.

Looks like Kapur isn't so stupid after all. His numbers aren't in line with the others because he's NOT expecting and new licensees anytime soon. Today's comments by mgt just confirms this.


It's not simple, but the jist of it is that the buyback is essentially offset by the number of options exercised by both officers, which are public, and by employees, which are not public.

As the price of the stock goes up, the more options held by officers and employees become 'in the money,' the more dilutive those option become.

Bottom line: Don't expect the number of outstanding shares (basic or diluted) to go down anytime soon.