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Apple and others might want to purchase Nokia, but shareholders would be mad to approve a sale

Entrepreneur and journalist Tristan Louis has written a piece for Business Insider entitled “Why Apple Should Acquire Nokia”. Among the most attractive reasons Louis gives for Apple to dip into its $100 billion cash pot to acquire Finland’s finest is the portfolio of 35,000 plus patents that would come with the deal, and the significance of the technologies they underpin:

Last year, Apple had to settle out of court over some of Nokia’s patent claims. While numbers were not made public, I’ve heard that the initial payout was north of US$500 million and that Nokia could be making between $5 and $7 in patent fees from every iPhone sold. Now stop and think about this for a second: for every phone sold by Apple, about 1% of the price goes back to Nokia (remember that the heavy carrier subsidies cover a substantial price of the device, which explains the difference in price between a carrier-locked device and unlocked ones you can buy directly from Apple). And Nokia has similar lawsuits against some Android manufacturers.

In fact, Nokia’s patent portfolio may be valuable enough on its own to justify buying the company. With analyst putting its value at anywhere between US$6 and US$10 billion, one could buy a patent portfolio and get a telecommunication and mapping company for almost free.

Louis notes that such is the strength of the Nokia portfolio that Apple probably would not be the only one interested in a purchase should that possibility ever arise – Microsoft and Google, among others, would also want to be in on the action. This, he states, would probably drive the price Nokia would fetch to above its current $10 billion market capitalisation. I have no doubt that would be the case

It strikes me, however, that if Louis is right about the Nokia patent portfolio, the royalties it is currently generating and could potentially generate moving forwards, a more realistic - if slightly longer – title for his article would have been: “Why Nokia is significantly undervalued and why its shareholders would be insane to even contemplate an offer from anyone that wasn’t way higher than the company’s current market capitalisation – an amount that would not represent small change for the likes of Apple, Microsoft and Google, but would instead make a big, gaping hole in their cash reserves.”

As this blog has noted before, the patent portfolio that Nokia has so carefully assembled and enhanced over the years gives it a viable future as an independent business. If those who run the company manage to grasp this, and the signs are that they are beginning to, then they can set about delivering on the potential of what they own. Should that happen, shareholders will be very happy indeed; especially those who have bought stock over the course of the last year.


Joff Wild
IAM Magazine
07 October 2012

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Licensing, IA management, Patents, IP business, IP valuation

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