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There was some good news for Alcatel-Lucent this week when its share price leapt by 19%; this was its steepest increase since October 2008. The move came after the struggling telecoms company reported smaller-than-expected losses for the second consecutive quarter. A restructuring plan announced by CEO Michel Combes last month –involving extensive planned asset sales, among other things – would appear to have boosted investors’ confidence in the business.
The proposal – dubbed ‘The Shift Plan’ – is aimed at refocusing Alcatel-Lucent as “an [internet protocol] networking and ultra-broadband specialist” and cutting investment in continued R&D around legacy telecoms equipment technologies. To achieve this, the French company is targeting €1 billion in asset sales over the next two years, as well as €1 billion in fixed cost savings and €2 billion in debt reprofiling during the same period. It is also looking at licensing IP relating to “strategic technologies” in areas such as cloud computing and video and audio coding as another potential value stream.
As of yet, there are few details of which assets Alcatel-Lucent may put up for sale – though there are rumours that Nokia, cash-rich after selling its handset unit to Microsoft, is considering the purchase of the French company’s wireless business.
But clearly – as the mention of strategic licensing in ‘The Shift Plan’ indicates – IP is a major asset for Alcatel-Lucent, and it is highly likely that many of the company’s 30,000-plus patents are currently being put under the microscope to ascertain their monetisation potential.
Alcatel-Lucent has already looked to its patent portfolio – which has been valued at anywhere between €3.9 billion and €9 billion, depending on who you believe – as a means of turning its fortunes around. Combes’ predecessor Ben Verwaayen oversaw the company’s securing of a €1.6 billion debt deal from Credit Suisse and Goldman Sachs using at least some of its patents as collateral.
While the terms of the loan are not publicly known, it is likely that there are significant limitations on what Alcatel-Lucent can do with the patents that it has put up as security. Licensing, for example, could be severely restricted or forbidden under the loan terms, as encumbrancing the patents with new licensees could decrease their monetisation value for the lender; while selling the collateralised assets is probably out of the question.
But perhaps an even bigger barrier to any attempt by the company to monetise its patents – including any that were not used to secure the debt deal – is presented by the French government. It emerged last December that authorities in the country – concerned that Alcatel-Lucent’s patents could end up in the hands of foreign owners if the company were to default on the Credit Suisse/Goldman Sachs loan – were considering the formation of a “patent consortium” to hold the assets; while earlier this year the French state was contemplating taking a stake in the troubled company to “protect [its] patents”.
Since the most valuable parts of the Alcatel-Lucent patent portfolio are likely to be non-French patent rights, much of their monetisation potential is likewise going to reside outside of France. To get the best price through either licensing or selling the patents foreign entities would have to be involved in the process; either way, the end result would be the transfer of technology and knowhow to non-French parties. Considering the lengths that the French government has appeared willing to go to in order to prevent foreign ownership of, or access to, Alcatel-Lucent’s patents, it would seem that there is a fairly good chance that any significant attempts by the company to monetise its IP assets abroad would be closely scrutinised – and could even be blocked – by the state. The prospect of that happening presumably makes it a lot harder for Alcatel-Lucent to realise its restructuring goals and keep its head above water.
IP management, Licensing, IP politics, Patents, IP business, IP finance, IP valuation