DannyD re recent changes and BoD activities you said:
....”I sure wish you would start work on another "Compelling Reasons to buy IDCC" piece rather than continuing to post compelling reasons to sell.”
What you refer to as "reasons to sell", I refer to as shareholder concerns over areas that could be improved upon at IDCC. I have never advocated to anyone at anytime that they should sell their IDCC shares. I have provided input to IDCC, primarily through emails and direct conversations, in those areas that I think could be strengthened in order to make the company and my investment better.
I began voicing my concerns and suggestions in late 2002, and they continue to this day. I think that some of my concerns have been listened to and addressed. However I certainly don’t think it was because of just my emails, but rather possibly a result of similar input and sentiment from other shareholders and analysts, in addition to myself. I think that I may have played some part, albeit small, in helping to affect some positive changes at IDCC over the most recent years. There is still more work to be done and changes to be made IMO. I think IDCC’s Directors still need shareholder and analyst input to help them in their decision process.
I will still try to impact shareholder sentiment in order to affect positive changes at IDCC. IMO the company will be much better off without Mr. Campagna as its COB. Even if Campagna is not voted out in this election, a very large vote against him might cause him to voluntarily step down, or provide the other Directors with enough ammunition to ask him to step down, or at least diffuse his power over the company.
Returning to the issue of my shareholder concerns and areas for improvement, I keep revisiting and expanding upon several of these initial shareholder concerns. The following excerpt is from an email that I sent to IDCC’s Directors in January 2003:
I am writing to you and the other directors to try and affect positive changes and needed improvements at IDCC. I have previously written to selected InterDigital executives for the same reasons. As long as I am a shareholder, I will not be passive but will continue to try to affect positive changes and needed improvements at IDCC.
I will reiterate the shareholder concerns and suggestions that I first made to you and the other directors back in October 2002. I have added insider selling to the list of concerns, and made minor modifications to a couple of others as follows:
Shareholder Concerns with IDCC and Suggestions
1. IDCC needs to foster a "shareholder friendly" environment, which would include better treatment of, accountability to, considerations for, and communications with individual and institutional investors.
2. IDCC needs to obtain greater Wall Street coverage from major brokerage firms, from prominent analysts, from more institutional investors, and from leading Wall Street publications. IDCC is a public company and not a privately run company, thus better and more effective communication with Wall Street is imperative.
3. IDCC's compensation committee needs to be expanded from two to include more outside directors. The Chairman of the Board should be taken off this committee due to possible appearances of conflict of interest. The current stock option policies should be thoroughly investigated as to the issues of excessiveness versus reasonableness, and tied to significant increases in shareholder value. There should be overall percentage limits as to the total outstanding options to the total outstanding shares. Also reasonable percentage limits should be established on the stock options granted each year, with an equitable sharing of the options between insiders and other productive IDCC employees.
4. IDCC's compensation committee needs to review the compensation packages of each company officer and each board member for reasonableness when compared to a large sampling of comparable size/type companies. Officer and director compensation at IDCC should not be significantly more than the average compensations of small-cap technological companies, unless there is clear and documented justification for doing so. This sampling should be fully documented and available upon request.
5. IDCC needs to limit discretionary insider selling to just a few specified exceptions. Instead IDCC needs to utilize prearranged 10b5-1 Trading Plans for the vast majority of future insider selling and limited to once a year. This policy would help minimize the negative implications normally associated with significant numbers of ongoing discretionary insider sales, while still allowing insider selling to occur, no matter if they have material undisclosed insider information or not.
6. IDCC needs to critically evaluate its current top management team and current board of directors. Is the necessary talent and expertise in place at the highest echelon to take IDCC to the next level, and to turn our small-cap company into a mid-to-large cap company and sustain it there?
7. IDCC needs to have in place before or at the beginning of each year a clearly laid out Business Plan, which should achieve increased shareholder value if properly executed. This plan should include annual goals, accompanying strategies, and milestone measurements. The plan should also provide measurement milestones per quarter for certain goals, such as quarterly revenues/earnings/cash flow. The Business Plan itself and a comparison of actual results to the plan should be clearly communicated to the Board, shareholders, and analysts on an ongoing basis. Company officers should be evaluated by and held accountable for the execution of the Business Plan by the Board.
8. IDCC needs to develop a revenue model that will aid analysts in understanding and projecting IDCC's future revenues. This model should include recurring royalty from existing licensees by product (infrastructure/handsets/other devices), settlement amounts/recurring royalties from anticipated new licensees, engineering services revenues from existing/new partnerships, chip revenues, protocol software revenues, technology transfer revenues, and any other projected revenue source. A good comprehensive revenue model should aid in projecting quarterly revenues, obtaining increased analyst coverage, and providing increased institutional investment in IDCC. This revenue model may have to await resolution of the big three (Nokia, Samsung, Ericy), but should be made available soon afterwards.
9. IDCC needs to adequately disclose how much is riding on the Ericy case. Does a Nokia rate agreement hinge upon Ericy? Do we have pending licenses or memos of understanding with non-licensees, such as Motorola, tied to or contingent upon Ericy? Do we have any existing licensees whose royalty obligations are tied-to, contingent upon, being delayed by, or otherwise affected by the Ericy litigation? How many patents and claims were removed from further trial consideration in Ericy? Were the claims removed from further consideration in the Ericy lawsuit due to favorable rulings from the judge on Ericy's pretrial motions, mutual consent/agreement, mediation, or pretrial rulings favorable to IDCC? What amount of damages are we seeking from Ericy for past infringement? Are all our legal eggs in this one basket?
10. IDCC needs better disclosures dealing with its existing licensees. Which licensees are we currently receiving recurring royalty payments from, which licensees are we currently earning deferred revenues from, which licensees are we in royalty disputes with, which licensees have prepaid advance balances remaining, which licensees have 2G paid-up provisions and what are the details of these provisions? IDCC also needs more disclosure about the Nokia, Matsushita, and Alcatel licenses?
11. IDCC needs to explain why we are experiencing so much difficulty in obtaining new licensees and updated licenses. If we really have what we claim to have and if we have a licensing team of 8 to 10 attorneys trying to obtain new and updated licenses, then why are we having so much difficulty with licensing? Why haven't some of our existing licensees, who are now selling 3G products, updated their licenses?
All shareholders of InterDigital are partners, and we should all act as such. Rather than be in dispute, I suggest that it would be very positive and constructive for the Board and outside shareholders to have appropriate dialogue.
Sincerely,
Ronny Marchman, CPA
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