What happens if no dividend and IDCC just hoards cash and does nothing but receive royalties? Within 2 years IDCC will have more than $1 Billion in cash and ST invs. So even then, IDCC will be worth more than $22 per shares in cash and have IP that generates over 300,000,000 a year in royalties. The worst you can do to IDCC is value it at cash and assign no value at all to the IP which generates $300 million a year in royalties (similar to what analysts do). At raw cash value of $22 per share, that would constitute a 5% APR gain. 5% is the worst case. Still better than a cash money market. However I have a feeling some institutional investor will see that IP that generates royalties of 300,000,000) (& by 2015 over $500,000,000) is not totally without value.
My point is that there is zero downside from here if you are going long term and virtually huge upside - even if they do nothing but sit on their laurels.
Since IDC remains at a relatively low price and according to their most recent financial reports have not done much buyback you have to think about management's goals - acquisition by an outside party or internal management takeover. If management was interested in an outside takeover then they would be doing things to jack up the stock price. Since this is not the case they are holding the cash to help finance a management takeover. Is this in the best interest of the remaining stockholders?
What about the potential for additional upfront license payments related to 4G LTE (Long term Evolution). IDCC holds more patents than anyone in the LTE space even Qcom. They haven't even begun to role out 4G yet which will provide data transfer speeds that dwarf whats availabe in 3G. According to the ETSI Database IDCC holds 32% of all Self-Reported Unique Patents related to LTE. Qcom owns 24%.
On CNBC I heard the general comment in an interview with a CEO that "a lot of CEOs are hoarding cash in this economic environment". They speculated that it was because they wanted to be in an advantageous position when the economy finally turned around. My opinion is that the economy won't turn around significantly until they start spending it (capex or jobs) or paying dividends.
Jonluxy - I'm a fan of IDCC, but I think your analysis is a little too aggressive. Most of the revenues for the next 3-4 years is already in the bank. Most notably, once Samsung finishes making their payments over the next 9 months, IDCC won't see any more money from them until after 2012. What I'm saying is that a good portion of the next few years' revenue is already in the bank. Even if we got a Nokia deal, it would be impossible to have $1 Billion in the bank in the next 2 years. That said, I do like the company, but management clearly needs to start making a move to increase the share price. If they can't come up with a reasonable use of the cash, then they should keep the buyback going.
Personally I think we see some type of news very soon.
It very out of character for this MGMT to not have bought shares from Oct 1 through Nov 2nd as stated in the 10-Q.
The rumors that they are being bought may be true.
Or they me be acquiring someone.
If they buy someone it better be accretive to earnings immediately and at the same time bring more new licenses quickly. And IDCC needs to EMPHATICALLY communicate this to the public with the announcement
Or look at it this way:
Right now, IDCC has about $10/share in cash and equivalents. The last QUARTER, it added about $215 million in cash to the balance sheet (based on info from MSN money). That is roughly $4+/share. Based on the current revenues, there is no reason why we shouldn't continue to do at LEAST that well for the foreseeable future.
The market currently holds that all of the other assets of IDCC are worth less than $400 million (roughly $9/share). Yet, those assets just generated $75 million in REVENUE over the third quarter. Would you invest $400 in something that would generate $188 PER YEAR in income (IDCC's net profit X4)? Hell yes, you would. That is a 47% return! And while you are doing this, you would get to sit on a HUGE mound of cash that gives you all sorts of business flexibility.
Reality will catch up with this thing. The numbers are just too compelling.
What I have been saying - I totally agree. It appears analysts and traders 'don't do' 'percents' or even simple addition. So I am sitting here fully loaded with IDCC and because I have also 60 calls I wouldn't mind a buyout at 33, though I would prefer 40 any day of the week (I can add). I am not just a day trader randomly pushing buttons and pulling my hair (or whatever they do).
jon..getting more interesting all the time here with increasing calls for a buyout and mgt hoarding cash.Whats up?
i think it bodes well for shareholders because even Carpenters lo-ball valuation is suggestng his $33 buyout or over 50% of todays trading price.
if someone has been accumulating during the sell off i'd expect they come forward soon.
Lots of talk about our "poison pill"..In a friendly acquisition that would be taken care of.Even in a LBO by a unfriendly mover the poison pill could be voted out.