Ddweller re income tax reversal your comments in bold:
"Ronny, assuming the comments Fagan made during the cc in Oct 2004 were correct, or I interpreted them correctly, then the majority of the reversal will hit Paid In Capital and not a credit to expense."
Fagan's comments that you are referring to occurred in October 2004, BEFORE the third quarter earnings results were known. The third quarter earnings press release was dated in November 9, 2004. However the third quarter 2004 financials, ACTUALLY charged more to income than to capital on the valuation reversal. Therefore I think the same thing will hold true on the 2005 reversal also.
"In addition, they probably wont give much credit for the reversal anyway since it is not part of their overall business even if 100% was reversed against income tax expense since it is non recurring."
Agreed the Street will not give much credit to the reversal, UNLESS it can be effectively communicated that the tax reversal is actually tied to LG's recurring royalties, which will begin to be recorded in the first quarter of 2006. Hopefully Fagan will be able to clearly communicate this important point re the tax reversal in the 4th quarter earnings press release and CC.
"I think the signal it sends is huge when you consider the value of the allowance is $75 million which means that in order to use that up, they will need to generate about 3 times that in taxable income in the future AND they are NOT including revenue from arbitrations and litigation in their internal projections."
I agree. Reversing $75m of deferred taxes will shelter about $200m of taxable income from actual income tax PAYMENTS. Again Fagan needs to effectively communicate this point too.
"In their analysis about whether or not it is more likely than not they will be able to utilize the NOL in the future, they stated that they are projecting nothing from the arbitrations. I don't agree with that, but knowing that they are only projecting future income from licensees to use up the reserve is very bullish IMO."
Given the Nokia arbitration decision and court ruling of enforcement, I agree that IDCC could COMPLETELY reverse the valuation allowance, if they so chose to do so at the end of 2005. However IDCC has stated that they will not reverse the full valuation allowance yet, but just the majority of the remaining valuation. This is a very conservative approach.
Market Data 
Markets 
AI
