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Verizon (VZ) Resolves Twin Patent Lawsuits With Huawei

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Verizon Communications Inc. VZ has amicably settled two patent lawsuits with telecommunication equipment manufacturer Huawei Technologies in an out-of-court settlement, the details of which were kept under wraps. The dramatic turn of events followed after court proceedings began in one of the trials last week in Marshall, TX, and brings to end a bitter legal battle amid waning Sino-U.S. bilateral trade relationship.

China-based Huawei had filed a lawsuit against Verizon in February 2020, alleging that the carrier violated its patents regarding computer networking, download security and video communications. The bone of contention was related to optical transport network systems, a key technology that enables the rapid transmission of large amounts of data. Verizon refuted the charges and filed a counter claim against Huawei, accusing it of using its patented inventions without licensing the technology.

The legal resolution puts to rest the uncertainty embroiled with the court proceedings and both the companies were reportedly pleased with the settlement, despite maintaining the secrecy of the due process involved. Huawei supposedly holds more than 100,000 active global patents across more than 40,000 patent families, including about 10,000 U.S. patents. The company aims to monetize these gold mines to make up for the lost revenues, after its bread and butter businesses of network equipment and smartphone manufacturing were crippled by the U.S. embargo.

On its part, Verizon is likely to equally benefit from the eventualities to better focus on its 5G roadmap in the country. Boasting one of the most efficient wireless networks in the United States, it continues to deploy the latest 4G LTE Advanced technologies to deliver faster peak data speeds and capacity for customers, driven by customer-focused planning, disciplined engineering and constant strategic investments. Verizon has also been aggressively forging ahead to expand its fiber optics networks to support 4G LTE and 5G wireless standards as well as wireline connections.

The 5G Ultra Wideband network uses a millimeter-wave spectrum and is designed to provide customers significantly faster download speed and greater bandwidth compared with 4G. Verizon’s 5G mobility service offers an unparalleled experience that impacts industries as diverse as public safety, health care, retail and sports. The company’s 5G network hinges on three fundamental drivers to deliver the full potential of next-generation wireless technology. These include massive spectrum holdings, particularly in the millimeter-wave bands for faster data transfer, end-to-end deep fiber resources and the ability to deploy a large number of small cells.

The company remains focused on making necessary capital expenditures to support increased demand for network traffic. In order to expand coverage and improve connectivity, Verizon has acquired 161MHz of mid-band spectrum in the C-Band auction for a total consideration of $45.5 billion. These airwaves offer significant bandwidth with better propagation characteristics for optimum coverage in both rural and urban areas. Verizon reportedly secured 3,511 of the 5,684 licenses up for grabs.

The stock has gained 1.3% in the past year compared with the industry’s growth of 5.9%.

Zacks Investment Research
Zacks Investment Research

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We remain impressed with the inherent growth potential of this Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the industry are Cogent Communications Holdings, Inc. CCOI, Ooma, Inc. OOMA and SeaChange International, Inc. SEAC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cogent delivered an earnings surprise of 29%, on average, in the trailing four quarters.

Ooma delivered an earnings surprise of 65.5%, on average, in the trailing four quarters.

SeaChange International has a long-term earnings growth expectation of 10%. It delivered an earnings surprise of 12.2%, on average, in the trailing four quarters.

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