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Nokia Corporation Message Board

  • sydneylocks sydneylocks Sep 12, 2013 9:42 PM Flag

    Nokia Patent valuation may be huge

    quoting from an SA poster, he raised some valid points..

    Upside of this stock is tremendous as all analyst upgrades and improved price targets fail to accurately value the patent portfolio and to a lesser extend here & location services.

    Take the most widely quoted valuation; JP Morgan's "Sum of the parts" analysis
    They place a value of 5.6 billion euro or $7.4 billion on the patent portfolio and many have called this a "high" estimate but in reality JP (like so may other analysts) is grossly undervaluing this asset. This estimate is based on "the Nortel precedent" which assumes that Nortels price per patent in its 2011 auction was $750,000; however, this is grossly inaccurate if you consider that only 2000 of the 6,000 Nortel patents acquired were still in force ie had any of its 20 year enforceable term remaining, thus the price per enforceable patent paid was approximately 2.25 million. Given its young portfolio, Nokia has about 8,000 enforceable patents in its 10000+ portfolio which would make the portfolio worth 18 billion using the "Nortel precedent." $10.6 billion more than the JP morgan valuation which would push their price per share estimate from $7.69 to $10.36. However, this is still an undervaluation because one must take into account quality of the patents in each portfolio; several studies done by IP valuation firms have all found that Nokia's portfolio contains significantly more patents considered novel or seminal (top 5% of all patents based on innovation and demand) to the 3G and 4G technologies; Nokia leads the industry in ownership of all patents considered seminal to 3/4g, at 10-18% depending on the study. While Nortel's portfolio contained just 1-2% of these seminal patents. Thus, Nokia's patent portfolio contains 5 to 9x more high quality integral patents than Nortel's. Combining this "quality" multiple with the previous $10.6 billion value based solely on volume, you would arrive at a total valuation of over $50 billion for Nokia's patent portfolio when using the Nortel auction prices as a proxy.

    Currently, all these analyst upgrades are simply a reaction to the unexpected sale, these analysts have very little clue or desire to accurately value these patents. However, as royalties continue to poor in they will begin to up these estimates, pushing the stock to highs not seen since 2010.

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    • Google Lawyer Says Patents Are ‘Gumming Up’ can almost hear the fear

      General Counsel Kent Walker said the smartphone industry is in an arms race for patents that is hurting consumers and leaving the company to “sort through the mess” of litigation.

      “It’s hard to find what’s the best path -- there’s so much litigation,” Walker said in an interview late yesterday. “We’re exploring a variety of different things.”

      Enlarge image Google Lawyer Says Patents ‘Gumming Up’

      Google Lawyer Says Patents ‘Gumming Up’

      Google’s Android software is now the most widely used mobile operating system, with 38.9 percent of the worldwide smartphone market, compared with 18.2 percent for Apple’s iPhone, according to research firm IDC. Photographer: Tony Avelar/Bloomberg

      Enlarge image Google Says Patents ‘Gumming Up’ Smartphone Innovation

      Google Says Patents ‘Gumming Up’ Smartphone Innovation

      Google is seeking to buy patents that would put it on a level plane with its rivals, and the company will continue to push to have the U.S. Patent and Trademark Office take a closer look at issued patents that are being used in litigation. Photographer: David Paul Morris/Bloomberg
      Google, whose Android mobile operating system has been targeted in at least six legal complaints, is seeking to buy intellectual property that could be used as a defense against litigation. Google, the world’s largest Internet search company, is also seeking to curb abuses of the system, calling on Congress and the Federal Trade Commission to rein in lawsuits, and asking the U.S. Patent and Trademark Office to take closer looks at patents being used in litigation, Walker said.

      “The tech industry has a significant problem,” he said. “Software patents are kind of gumming up the works of innovation.”

      Google’s competitors have said the Mountain View, California-based company is critical of the patent system because it has few patents of its own and entered a smartphone market where companies had been researching and selling products for years before Android phones went on sale in 2008.

      Innovation, Competition

      Google has been assigned 728 patents through today, according to the U.S. Patent and Trademark Office database, mostly for search engine technology. Apple has more than 4,000 U.S. patents, and Microsoft Corp. (MSFT) more than 18,000, according to the database. Patents give their owners a right to exclude others from using the invention for a set period of time.

      “It is about innovation and competition,” said Will Stofega, a program manager at researcher IDC Corp. “Doing basic research to bring new products to market is something quite distinct from their core capabilities.”

      Google’s position is part of a larger debate over whether certain software should be eligible for patent protection, said Ron Laurie, managing director of Inflexion Point Strategy LLC, which counsels companies on purchasing intellectual property. Microsoft and Oracle Corp. had the same “cultural bias” more than a decade ago, he said.

      “Every software company would be happy if patents went away,” Laurie said. “Patents are irrelevant to YouTube, face it. Software is developed incrementally and patents get in the way of incremental innovation.”

      Google’s Weakness

      The Android system is a free, open-source program that relies on some nonproprietary features Google didn’t create and allows outside developers to modify the code. That has left the company vulnerable to claims that it built Android on the backs of research done by other technology companies.

      “A patent is a patent and you may not agree with it, but it’s the law,” Stofega said. “It’s a weakness for Google and everyone’s acknowledged it. The competition is so fierce and so brutal, any perceived weakness is going to be found out and you’re going to pay for it, in court or wherever.”

      Google, which had $39.1 billion in cash and short-term investments as of June, put in an initial $900 million offer in April to buy the patents of bankrupt phone-equipment maker Nortel Networks Corp. It was outbid by a group that includes Apple, Microsoft, and Research In Motion Ltd. (RIM), which all make devices that compete with Android phones.

      More Discipline

      Walker wouldn’t say whether Google will bid on InterDigital Inc. -- an owner of more than 1,300 patents that is exploring a potential sale -- the digital-imaging patents of Eastman Kodak Co. (EK) or any other portfolio of intellectual property. He said it’s unclear if the $4.5 billion winning bid for the Nortel patents is a sign future sales will command a similar premium.

      “We want to be disciplined about how we approach all this stuff,” Walker said. “We’re looking for a reasonable alternative, but we want to make sure Google and the companies Google partners with aren’t shut out of the opportunity to bring great new products and features to consumers.”

      Google rose $3.54 to $622.52 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have climbed 4.8 percent this year.

      Android is the most widely used mobile operating system for smartphones, with 38.9 percent of the worldwide market, compared with 18.2 percent for Apple’s iPhone, according to IDC.

      Oracle, the world’s largest supplier of database software, contends Android uses its Java programming language, in violation of patents and copyrights, according to court filings. Redwood City, California-based Oracle sued, seeking as much as $6.1 billion in damages, after Google balked at paying $100 million for a license to use the technology.

      Roll the Dice

      In ruling last week on what type of damages should be considered, U.S. District Judge William Alsup said “Google may have simply been brazen, preferring to roll the dice on possible litigation rather than to pay a fair price.”

      Alsup said $6.1 billion in damages was too high a price for consideration based on facts of the case and set $100 million as the starting point for discussion of damages. Walker said Google maintains that the patents are invalid and not infringed.

      Apple, based in Cupertino, California, has patent cases before the U.S. International Trade Commission that target Android phones made by Samsung Electronics Co., HTC Corp. (2498) and Motorola Mobility Holdings Inc. Each of those companies has filed cases against Apple.

      Microsoft and Motorola Mobility also have patent suits against each other, and Microsoft has a pending ITC complaint against Barnes & Noble Inc. over the Android-based Nook reader.

      Google has few of its own patents, while Samsung and Motorola Mobility have been able to use their patents to lodge infringement claims against Apple and Redmond, Washington-based Microsoft.

      ‘Mutually Assured Destruction’

      Winston Yung, chief financial officer of Taoyuan, Taiwan- based HTC, said in an interview today that the company is willing to negotiate a settlement with Apple.

      Walker said it’s “crazy” that both HTC and Apple phones could be barred from the U.S. market if a deal isn’t reached.

      “Each side can blow the other up on some level --everybody can block the other’s products from coming to market,” Walker said. “You create this mutually assured destruction scenario, but it’s very expensive to get all those munitions.”

      Google has been hesitant to use patents to file suits against other companies, he said.

      “Buying patents so you can hit the other guy, it’s not good form,” Walker said. “You hate to unilaterally disarm here, but we haven’t in our history.”

      ‘We’ll be Fine’

      Google has sued to challenge the validity of other companies’ patents. The company filed a lawsuit today against closely held SourceProse Inc., which claimed that phones made by companies including HTC and Apple infringe its patent through the Google Maps Mobile product.

      Google is seeking a court order that would clear Google Maps Mobile of infringement, or a finding that the SourceProse patents are invalid. Google in March joined with Microsoft to challenge the validity of mapping patents owned by GeoTag Inc., which had sued their customers.

      Google is also providing support and technical help to companies that make products for Android and are being sued, either by rival companies such as Apple and Microsoft, or by small patent owners that don’t make products.

      “We’ll be fine,” Walker said. “We have the resources to balance the scales here

      • 1 Reply to sydneylocks
      • If you read thru the above article...notice the importance of Nokia's lack of a smartphone Devices division post msft deal, and the general IP weakness of Google's infringing android platform....Nothing for its victims to sue, so Nokia can in effect shut down all of google's android ecosystem unless Google and its oems pay thru the nose....sweet justice indeed...

    • Once in a while, among the flood of turd that usually flows through here, you find a few gems posted...

      Nicely done to the author and poster.

    • brnichols87 Sep 13, 2013 12:09 PM Flag

      Hey everyone, I am the analyst that posted the valuation analysis on SA, glad everyone enjoyed the brief analysis. I have been bullish on the patent portfolio since last Summer after pouring through data on this asset last Summer which resulted in this report posted on SA; Please take a look if you have not already and feel free to ask any questions you may have about the patents or here maps location services of which I also have quite a bit of knowledge, I wrote a 50 page report on the maps/location services for a hedge fund last Winter. It is truly astounding how much higher I think this stock could go!

      Sentiment: Strong Buy

    • Google in the crosshairs:
      Microsoft plus Nokia: Pending patent troll?
      While the focus of the news of Microsoft's acquisition of Nokia's devices businesses is the future of Microsoft as an Apple clone, there's another story too. What's left at Nokia? Not much -- Microsoft is taking both the traditional mobile phone and smartphone businesses. According to Nokia's press release, there's a mapping data business, a technology business providing phone companies with infrastructure, and a substantial patent portfolio. While the network equipment business is significant, it's the patent portfolio that raises the most interesting questions. Instead of acquiring the patents related to the device business as might be expected, Microsoft is merely licensing them and leaving Nokia in possession of the actual patents. The license is nonexclusive, and Nokia is free to use them any way it wishes. That means Nokia is free to treat them as a profit center. Nokia has already shown it is ready to be aggressive with its patent portfolio. For example, it is the holder of the only patents known to read on Google's (otherwise unencumbered) VP8 codec family, and Nokia has said it has no intention of licensing to Google, with the implication it will instead block the standard from progressing. That aggression can only be magnified by the new freedom Nokia has to leverage the rest of its portfolio. By divesting its devices business yet retaining ownership of the patents that relate to them, Nokia has immunized itself from retaliatory action when it makes future patent offensives. In the past, a company such as Google -- most likely Nokia's primary target -- could retaliate by attacking Nokia's infringement of its own patents, but that line of defense is no longer available since all the products now belong to Microsoft. That's the background to Nokia's statement that it "plans to continue to build Nokia's patent portfolio [and] to expand its industry-leading technology licensing program." This is not just about the VP8 patents. Nokia can now afford to analyze everyone's business -- especially Apple, Samsung, and Google -- and identify "infringements" that can be profitably leveraged. With extensive investment in mobile technology over many years, the potential for Nokia to burden Microsoft's competitors with expensive litigation and obstructive injunctions on many subjects is huge. With this transaction, Microsoft is not only trying to copy Apple's iPhone business model with integrated software and hardware. It's also created a fearsome patent-licensing entity that will ruthlessly seek fees from any part of the mobile industry that competes with Microsoft. That entity has access to €1.5 billion of Microsoft funding, so it can indulge in big-budget litigation even before it's successfully collected on any patents. In other words, Nokia has abundant opportunity to jump into the patent troll business, with Microsoft's competitors in the cross-wires

    • Bump. This is too interesting to miss.

    • leestoller Sep 13, 2013 1:24 AM Flag

      Agree,$10 by 12.30.13 ! Long & buying!

      Sentiment: Strong Buy

    • Great post!

      I think Here might also have unexpected value too. The CFO said, when he Elop and the chairman of the board were being criticised at the announcement of the sale, that the three remaining businesses were very strong businesses. He said this in defence of the assertion that this was best for investors. Things are looking good!

    • Excellent post. Thank you!

    • take a look at nokia's win over apple in its IP litigation, and the current win over HTC...despite apple's huge warchest, they're paying royalties to Nokia

    • GULP!

      Sentiment: Strong Buy

5.600.000(0.00%)May 27 4:03 PMEDT