Oh please, another armchair CEO getting lost in abstractions.
Get real, will you?
1) Until the current system is changed in early 2004, IDCC can still use its option program to attract engineering talent. True, there is a general glut of engineers in the marketplace but there is always a shortage of talented wireless engineers.
For instance, Sony/Ericsson, Nokia and Samsung all plan to increase their CDMA chipset engineering effort this year after years of unproductive work. If IDCC somehow manages to attract a productive group of engineers from QCOM with its options program, wouldn't that increase its 3G negotiating leverage with Sony/Ericsson, Nokia and Samsung?
2) The exercise of an option results in a cash infusion, a tax benefit and stock dilution. IDCC has tax-loss carryforwards of around $150M that should come in real handy now that it is starting to make real money.
3) Again, the exercise of an option results in a cash infusion, a tax benefit and stock dilution. What's wrong with adding more cash to IDCC's balance sheet from the exercise of options? 10M shares @$22 per share would add $220M. 10M shares@$30 per share would add $300M. 10M shares@$40 per share would add $400M. Catch my drift?
How long do you think it will take IDCC to collect royalties of that magnitude? 2-4 years? Consider also how the market would value IDCC if it exits 2003 with at least $200M in sales and $600M-$800M in cash/investement?
4) A larger cash balance would also allow IDCC more M&A options since it can sweeten any bid by increasing the cash component.
5) It seems that many people think that dilution is inherently bad, but what is true for large established companies is not necessarily true for small companies just entering their high growth stage. Dilution is not yet a problem for IDCC. I even think that the tight float is actually preventing more mid-cap funds from establishing larger positions or from even opening new positions.
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