Replies to post #258697 on InterDigital Inc (IDCC)

[rmarchma]

Count re overstating cost of dilution you said:

...."However the cost of the buybacks to undo the dilution caused by stock options needs to be reduced by the exercise cost of them that is paid to the company. RSUs, on the other hand, have eliminated that little nuisance from the equation. I would guess that the actual cost is less than half of the total you had, but even at that it comes to dollars per share, which is huge."

Good and valid point that I overlooked. I believe that the vast majority of IDCC's stock options and stock warrants were exercised for less than $10 per share. The average share cost of all the share buybacks was slightly over $24 per share. However, a good part of the dilution came from RSUs and restricted stock. As you noted RSUs (and restricted stock) doesn't involve any cost to the recepients, so there would be no cash inflow to IDCC when they vested and the shares issued, unlike options and warrants.

Therefore, although you make a valid point, I disagree somewhat with your following conclusion: "I would guess that the actual cost is less than half of the total you had". I think it is MUCH less than half of my preliminary total, perhaps 25% at the most.

[rmarchma]

Count re cash receipts from options, warrants, and employee stock plans you said:

...."However the cost of the buybacks to undo the dilution caused by stock options needs to be reduced by the exercise cost of them that is paid to the company. RSUs, on the other hand, have eliminated that little nuisance from the equation. I would guess that the actual cost is less than half of the total you had, but even at that it comes to dollars per share, which is huge."

The total gross cost of the share buybacks from December 1995 through March 2009 was $544.2m to repurchase 22.6m Treasury Shares. The total cash proceeds received by IDCC from the exercise of stock options, warrants, and employee stock plan purchases during that same time period amounted to $149.5m. Therefore, the net cost to IDCC to undo the dilution since 1995 and to get back to essentially the same number of outstanding shares as back then amounted to $394.7m ($544.2m -$149.5m) or roughly $400m.

To determine the cash received from the exercise of stock options, warrants, and employee stock plan purchases, I had to go back through the Statements of Cash Flows for each of the years 1996 - 2008, plus the 1st quarter of 2009. The highest year was 2006 at $40.6m cash received, and the next highest was 2003 at $19.2m. The least annual amounts were $2.2m in 2008 and $.8m in 1998. In recent years, IDCC has primarily been issuing restricted stock and RSUs, which involve no cost to the directors and employees, and thus no cash receipts to the company from the issuing or vesting of restricted stock and RSUs.