Last week, Dell announced a deal which will see shares in the Texan personal computer manufacturer taken off of the public markets and into private ownership in what is reportedly the largest leveraged buyout since the global financial crisis struck in 2008. Company founder Michael Dell, private equity firm Silver Lake Partners and Microsoft have joined forces to spend $24.4 billion on taking the company private and removing it from the glare of the stock market as it explores its strategic options. According to some commentators, Dell is planning to change its long-term business strategy by leaving the increasingly tough PC market behind and refocusing to become an enterprise-service-oriented information technology company – a transition similar to that previously made by IBM, and that which is currently in progress at Dell’s key competitor Hewlett-Packard.
However, there is at least one factor that clearly separates Dell from both Big Blue and HP. The most recent issue of IAM featured the US Patent 100 – a list of the 100 companies that hold the most US patents. IBM – which has been the number one recipient of US patents every year for the past two decades – came in at second, with 38,494 granted US patents in force. HP was seventh, with 23,365. Dell did not appear on the list.
The research which went into putting the US Patent 100 together also provided information on the patent portfolios of a number of other companies (IAM will publish some of this later in the year). According to the data, Dell holds 2,715 US patents and 775 applications. That is by no means small fry, but in terms of size alone it does pale in comparison to the hefty holdings of IBM and HP.
Of course, all of this is not to say that a vast patent portfolio is a prerequisite for building the type of business that Dell is supposedly aiming for. Quality is not the same as quantity, and in terms of the metrics used in compiling the US Patent 100 that give an indication of portfolio quality (based on the rate at which patents are cited and the year-over-year compound annual growth rate of the number of applications filed during the last three years) Dell more or less matches the other two companies. The other thing worth emphasising is that Microsoft has come in on the deal – contributing $2 billion – and we can be pretty certain that, as a company that knows well the strategic potential of IP, it will have carefully considered Dell’s patent position before making that kind of investment.
Nonetheless, IP monetisation has been central to IBM’s business for many years now (hence the company's inclusion on IAM's list of the 50 influencers that have shaped today's IP market), and the sheer volume of patents and applications it generates is no doubt a major factor in enabling that. HP, too, has for quite some time been heavily engaged in licensing and selling off portions of its extensive patent portfolio in order to create revenue. And both companies doubtless benefit from the broad freedom to operate that a wide-ranging portfolio can afford its owner. Obviously, Dell can still press ahead with investing in R&D and building up its patent holding, and it can also acquire the patents it needs to achieve its objectives from elsewhere, just as it has done in the past. But HP’s much larger portfolio means that it already possesses the potential to create value from assets that Dell currently doesn’t have. When companies are taking the monumental risks associated with overhauling their business strategies to pursue a new set of goals, IP can help to smooth their way into new product and service categories and can provide a secure and steady source of revenue to see them through that process – and it is likely that the more IP they have, the greater the opportunities for realising value. It will be interesting to watch Dell's acquisition activities in the next few years.
IP management, Licensing, Patents, IP business, IP finance