Replies to post #63621 on InterDigital Inc (IDCC)

[mschere]

Question..What did your survey of American stores and wireless Operators..have to do with Sharp Vodafone sales and NEC 3G sales in Japan and ASIA/Europe for the First Quarter 2004? TIA

Now, I combine the above remarks about the LACK of inventory sell-in with what I see locally, which is that I, like many others on this board, bought a new cell phone in the 4Q, but who here has mentioned buying a new phone since then?

Also, I have noticed that the carriers have greatly cut advertising all the way to zero until just recently I have seen a couple of TV ads from Verizon (Trump). I have not noticed the cell phone push ads from Best Buy, Circuit City, Cingular, etc, etc. like I saw in the 4Q. This means that nobody, except Verizon very recently, is actually pushing phones. Do you remember the advertising, rebates, and pushes to sell phones in the 4Q? Well, that push seems to have dried up in 1Q04, from what I can see locally.

Add in ANOTHER significant sequential quarter cost increase and all together, unless the NEC revenue catchup and some other one-time revenues can offset the cost increase and seasonal revenue shortfall, it looks like the 1Q could be ugly from an earnings perspective, however, cash flow looks to be strong due to advance payments.

[rmarchma]

Corp_Buyer re operating expense increases

I don’t feel like I have a handle on IDCC’s expenses to the same extent as revenues. But let me say that I understand where you are coming from in the area of operating expenses. In 2002, I pretty much used $20m per quarter for total operating expense projections. Then in 2003, I started with $21m, then $22m, and by the last quarter of 2003, I was using $23m for operating expenses. It appears that the first quarter of 2004, the operating expenses will significantly increase again to about $24.5m, assuming another 7% quarter-over-quarter increase per guidance.

You said:

..."Incidentally, does anybody have any comments on these cost data comparisons (YE 2003 vs. 2002) showing that DEVELOPMENT spending went down (presumeably including the Tantivy key people) while G&A and Marketing went up 19% and 15% respectively? Patent Administration and Licensing costs increased 22% which probably includes the litigation costs so that does not concern me. However, why should our overhead costs INCREASE so much while DEVELOPMENT actually DECREASED?"

Research and Development expenses, mainly for our engineers, have stayed virtually flat over the last couple of years. Yes the 10 additional engineers from Tantivy should be included in this expense category in 2003. The significant increases are in General and Administrative expenses up 19% in 2003. A lot of this increase would be the D&O liability insurance, which increased about $1.5m in 2003, and would explain about 50% of the $3m increase in G&A expenses. Another significant increase of 22%, or another $3m increase, is in Patent Adm. and Licensing. Most of this increase is probably due to attorney costs for arbitrations and litigation. Also the amortization of the Tantivy acquired patents would be in this expense category also. Although Sales and Marketing expenses increased 15%, the dollar increase of about $600,000 was not that significant.

[Desert dweller]

Corp Buyer, you keep posting your concerns about the increase in costs. Can I ask you, at what time do you want management to increase investment in both additional personnel and legal fees to collect what is rightfully ours? The increase in cost related to D&O insurance is not IDCC specific and is all companies are experiencing this increase.

You and I don't know what they are spending money on specifically but the fact that they have $105 million in the bank as of 12/31, are receiving something like $25 million during the quarter from Ericy & Sony/Ericy, according to a previous post from Ronny I think, and are going to receive at least $17 million from Sharp during the second quarter. That excludes all other money that will be coming in from others including NEC. This company will not experience any cash constraints for the foreseeable future and yet you continue to complain about the increases in spending.

I personally don't see it as a problem. Heck, I want them to increase the spending even more and institute a few more lawsuits to get the ball rolling as to when we will be paid. We all thought Ericy would be the catalyst for additional agreements but except for a few ethical companies, the wireless industry appears to be made up of scum that only understand litigation. I say while we have the cash, go after all the thieving bastards.