GigaOM » Nortel

Big Tech’s patent bubble: an “aberration” waiting to burst

Jeff John Roberts — Fri, 10 Aug 2012 19:41:09 +0000

As a much-hyped auction of Kodak patents fails to draw expected interest, one intellectual property authority is warning that recent patent-mania in the tech sector could burst.

Neil Wilkof is a veteran intellectual property lawyer and has taught law in the U.S. and Israel. He describes recent eye-popping patent purchases, including those involving AOL and Nortel, as an “aberration.”

“It’s a sign of something gone awry, not a healthy market,” said Wilkof in a phone interview. “I think we’re in a patent bubble in a very specific industry. It’s a distorted market and misallocation of resources.”

Wilkof points to tech companies’ scramble to buy more and more patents in response to the lawsuits engulfing the smartphone and social media industry. These purchases have included Google’s $12.5 billion acquisition of Motorola Mobility and Facebook’s decision to blow $550 million of its cash on AOL patents.

Wilkof worries that these purchases don’t improve the companies’ ability to innovate or build a successful business – if the patents are so great, he notes, Kodak and Nortel would still be flourishing.

“The accumulation of patents [through these purchases] doesn’t lead to internal economic value,” said Wilkof, who is a booster of patents in general.

He also questions the industries that have built up around the patent industries. Wilkof says that a recent “patent valuation” conference in Singapore, participants admitted that valuing a patent portfolio was more art than science and – even though they have to tell their clients the opposite.

“You need to be the Wizard of Oz. You have to convince people there’s something behind the curtain and that only you know how to operate it.”

There are recent signs, however, that the patent bubble may be beginning to pop. The Wall Street Journal reported this week that initial bids for Kodak’s digital patent portfolio “came in far below the $2.6 billion the company said they could be worth.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Research In Motion: future scenarios for its fate

Wed, 01 Aug 2012 06:55:26 +0000

It’s all too easy to pile on to the Research In Motion–bashing bandwagon. The company’s decline is the stuff of water-cooler chatter, and RIM will doubtless end up as the subject of dozens of business-school case studies. But technology markets are always a little uncertain, so for now let’s get beyond the finger-pointing. RIM is a different firm today than it was in 2007. It has new management, a full awareness of the gravity of the situation, restless investors, an upcoming OS release and a number of lingering advantages that can still be leveraged. What might the future hold for RIM? CEO Thorsten Heins has said he plans to surprise critics with RIM’s transformation. But in case you don’t like surprises, here’s a brief look at the most likely scenarios for RIM going forward and their probability of occurring.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Is Ericsson rolling out 3G using someone else’s technology?

Kevin Fitchard — Thu, 09 Feb 2012 00:08:07 +0000

When Ericsson bought Nortel’s wireless business in 2009 it instantly propelled itself to the top of the North American mobile infrastructure heap, largely because the deal exposed the Swedish vendor to the dominant network technology in the U.S., CDMA. But the CDMA portfolio Ericsson bought wasn’t entirely Nortel’s own. Rather than develop CDMA’s 3G component, EV-DO, internally, Nortel licensed the technology from radio specialist Airvana. Now Airvana is claiming that Ericsson is reneging on its licensing deal and is instead selling a “knock-off” version of its EV-DO technology to Verizon Wireless, Sprint(s) and other CDMA operators.

Airvana is better known today as a femtocell technology company today, but its early pioneering work on EV-DO a decade ago caught the attention of Nortel, which was trailing behind its primary CDMA competitor Lucent Technologies in 3G development. The licensing agreement wound up being very lucrative for Airvana and effectively made Nortel its only customer.

According to Airvana’s lawsuit, filed today in a New York state court (pdf), Ericsson sought to renegotiate its licensing deals with Airvana shortly after the Nortel acquisition closed. Airvana didn’t want to come to new terms, and, according to the filing, Ericsson soon started developing an “in-house” version of EV-DO to sell to its new CDMA customers, all of whom were experiencing huge surges in mobile data demand. In late 2011, Airvana said, Ericsson revealed that it had designed its own EV-DO products in collaboration with LG and planned to start testing them in Sprint’s network this year. But Airvana claims that’s all a front, and that the new EV-DO platform is a thinly veiled version of Airvana’s own product software developed from its source code. Airvana is asking for $330 million in damages and demanding Ericsson stop selling its new EV-DO product line.

We reached out to Ericsson for a response, and spokeswoman Kathy Egan Wummer said that while she could not speak directly on the lawsuit, Ericsson wouldn’t be backing off any of its current or future customer contracts to deploy EV-DO gear:

“We are aware that Airvana has initiated legal proceedings against Ericson. While we will not comment on ongoing litigation, we can say that we are committed to supporting our customers and will take appropriate action to protect both their interests and those of Ericsson. Accordingly, we will vigorously defend our right to deploy the Ericsson EV-DO Global System in customer networks according to existing commitments.”

There’s no way to know whether the lawsuit presents a serious threat to Ericsson. But if it does, it puts the vendor in a tough position since the 3G market is in astate of flux. It needs EV-DO technology today to meet current 3G network demands, driven by devices like the iPhone. But EV-DO sales will soon start petering off as operators move to LTE. Operators certainly won’t shut down their EV-DO networks when LTE arrives, but they will stop adding 3G capacity.

Image courtesy of Nikhil Verma

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

NSN sells wireline business to Adtran. Here is why.

Stacey Higginbotham — Mon, 12 Dec 2011 17:04:32 +0000

NSN's headquarters

Nokia Siemens Networks said it will sell its wireline broadband assets to ADTRAN for an undisclosed amount. The deal is the second in as many months for NSN, which had previously been hoping for a buyer for its entire business. The company, which is a joint venture between Siemens and Nokia, says it is planning to exit lines of business that fall outside the bustling mobile broadband industry, but it may also be an effort to slim down to find a buyer.

Nokia said it expected to close the sale of its fixed line broadband access business and associated professional services to ADTRAN, a wireline gear provider, in April 2012. NSN in November had sold its microwave packet business to DragonWave in a cash and stock deal.

NSN has had a rocky time along with the rest of the telecommunications gear industry as consolidation among customers and competition from Huawei and ZTE have put the squeeze on vendors such as Nortel (it filed for bankruptcy), Motorola (it split its businesses), Ericsson (it has decided to focus on mobile broadband as well) and Alcatel-Lucent (it is trying to worm into the cloud market). The company has attempted to find a private equity buyer, but gave up and announced a restructuring in November.

Image of NSN’s HQ courtesy of NSN.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

The future of mobile: a segment analysis by GigaOM Pro

Mon, 26 Sep 2011 07:01:22 +0000

As our demand for data increases, so too do the number of mobile devices and services. Add to that the infrastructure needed to support such connectivity, and a wide, complex picture of the mobile industry emerges. This report examines the various sectors of the mobile landscape and what the future holds for each. Hardware, cloud services, mobile search, advertising, location-based services and the growing ubiquity of the Internet of Things will all play an important role in the concept of mobility as it shifts and evolves over the next several years. With the help of more than a dozen contributors, GigaOM Pro presents a comprehensive analysis of the companies and trends that will lead us into the next era of mobile.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

What the Google-Motorola deal means for Android, Microsoft and the mobile industry

Tue, 16 Aug 2011 18:04:33 +0000

Google rocked the mobile world on Monday, August 15, with the news that it will buy Motorola Mobility for $12.5 billion, marking a 63-percent premium for the handset manufacturer. It’s a move that ushers Google into the exclusive club of companies that control both the hardware and software elements of their smartphone offerings, and it will enable Google to design handsets that are more closely integrated with Android. However, the deal doesn’t come without its risks, and it remains to be seen just how it will affect other handset makers, competition from Microsoft and the crucial patent issues currently surrounding Google. Companies mentioned in this report include Apple, Research In Motion and Samsung. For a full list of companies, and to read the full report, sign up for a free trial.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

What should Apple do with all that cash?

Erica Ogg — Thu, 21 Jul 2011 21:41:14 +0000

Apple just had another monster quarter, pulling in revenue of $29 billion. It was also able to put away $10.4 billion in cash, bringing its total cash and securities to $76.2 billion. Below is a chart from Asymco that illustrates the way Apple’s cash has grown over the past five years. Unlike companies of similar size and age, Apple doesn’t regularly make acquisitions or pay a dividend to shareholders. It’s extremely conservative about what it does with its money, which has become, well, a little controversial.

Asymco's chart of Apple's cash hoard following the company's Q3 2011 earnings

Here’s what some of the most vocal are saying about what Apple should do with its mound of cash.

Bernstein Research analyst Toni Sacconaghi in the Wall Street Journal called it ”a level of cash that’s preposterous by any metric.” He says Apple should either buy back shares of its stock or issue a dividend.
Over at Fortune, Philip Elmer-DeWitt argues against such a movie and warns “don’t be fooled” by those Wall Street analysts howling about Apple paying a dividend. “What these men want done is for Apple to give the money to ‘the stockholders,’” he writes. “What they don’t say is that they are the stockholders. Institutions own more than 70% of Apple’s shares and would be the primary beneficiaries of any buyback or dividend.”
Daily Finance suggested Apple could buy a company with its hoard of cash. DF didn’t suggest any company in particular should be targeted. But it did point out that “[w]ith a market cap in excess of $360 billion, it could easily use its stock as currency” to make an even larger acquisition.
Other eyebrow-raising suggestions thrown out there include Apple getting into the TV or gaming business, or snapping up Facebook, Hulu, or Netflix.

If the past is a predictor of the future, Apple is likely to do nothing drastic. This is not the first time the company has come under fire for its conservative spending ways. At a shareholder meeting last year, Jobs was peppered with questions regarding his plans for the money (he joked he was going to “throw a toga party” with it) but he answered very directly about how Apple think about its cash on hand: namely that it provides “security and flexibility.”

“When you take risks, it’s like jumping up in the air, and it’s nice to know the ground will be there when you land,” he said at the time. “We run our company conservatively from a financial point of view because you never know what opportunity is around the corner … We’re very fortunate that if we needed to acquire something we could write a check for it and not have to borrow money.”

With the ongoing war in the mobile industry over intellectual property taking place right now, that attitude is proving awfully prescient. Earlier this month Apple was able to put down $2.6 billion as part of a consortium that bought Nortel’s mobile patent portfolio, an amount that’s relatively tiny compared with the rest of the cash Apple’s got stashed away.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Apple’s share of Nortel patent purchase: $2.6B

Erica Ogg — Thu, 21 Jul 2011 15:54:36 +0000

It turns out Apple wasn’t just a participant in the consortium that included Microsoft, Sony and Research in Motion that won the auction for Nortel’s patent portfolio: It contributed more than half of the $4.5 billion purchase price. Mobile patent portfolios that are up for grabs have become strategically important for Apple to defend itself in a variety of patent disputes over mobile devices with Samsung, Nokia, HTC and others.

From Apple’s 10-Q filed with the SEC Wednesday:

On June 27, 2011, the Company, as part of a consortium, participated in the acquisition of Nortel’s patent portfolio for an overall purchase price of $4.5 billion, of which the Company’s contribution will be approximately $2.6 billion. This asset acquisition is subject to approval by various regulatory agencies.

Google may have lost out to the Apple-led consortium on Nortel, but it’s back on the hunt. It’s been reported that both Google and Apple are also interested in scooping up another collection of intellectual property up for sale, that of mobile-phone designer InterDigital.

It’s clear Apple is ready to play defense on its products, as COO Tim Cook warned Tuesday, “We want people to invent their own stuff. We’re going to make sure we defend our portfiolio from everyone.”

But bulking up on Nortel’s patents, and potentially InterDigital’s, shows Apple is prepared to go on the offensive too.

Photo courtesy of Flickr user Robert S. Donovan

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Nokia Siemens Networks throws in the towel on sale

Stacey Higginbotham — Wed, 13 Jul 2011 13:43:44 +0000

NSN's headquarters.

I guess Nokia and Siemens are stuck with their joint venture in a telecommunications equipment company. Nokia Siemens Networks Wednesday said it had completed its review of private equity bids and decided to recommit to each other. In less romantic terms, it means no one offered enough money, so Nokia and Siemens may have to pony up more money to keep NSN afloat.

Last month, a story in the Wall Street Journal cited the company’s problems finding buyers and said the parent companies might have to put in more capital — something the struggling Nokia may find hard to swallow. Wednesday, the company confirmed it, saying in a press release:

“We believe that the current shareholders are in the best position to further enhance the value of the company,” said Olli-Pekka Kallasvuo, chairman of Nokia Siemens Networks.

Nokia Siemens Networks has made good progress in its turnaround plan, with first quarter 2011 results marking a third successive quarter of year-on-year reported net sales growth, as well as a fifth quarter of non-IFRS operating profits since it announced its change in strategy in November 2009.

The question is whether Nokia can afford to pony up more cash for a business stuck in a consolidating and more competitive environment thanks to the growth of Chinese equipment companies Huawei and ZTE. We have seen Alcatel-Lucent struggle, Nortel go bankrupt and even Motorola sell off elements of its wireless gear business (to NSN no less). Sounds kind of like a money pit.

Image of NSN’s HQ courtesy of NSN.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

Nokia Siemens is up against the wall

Stacey Higginbotham — Mon, 27 Jun 2011 13:25:25 +0000

Nokia Siemens Networks, the telecommunications gear joint venture between Siemens and Nokia, is running out of options. The Wall Street Journal reported this weekend that the companies couldn’t find a private equity buyer for the gear maker, and that they were thinking of putting more money into the entity. However, throwing good money after bad doesn’t seem like it will do any good.

The partnership between the two companies began five years ago, but in the past few years, competition from Huawei and ZTE has whittled away at its market, consolidation has compressed the sector, and the rise of a monolithic standard (LTE) on the wireless side has made it hard for the equipment market to support a multitude of vendors. We have seen Alcatel-Lucent struggle, Nortel go bankrupt and even Motorola sell off elements of its wireless gear business.

So as Nokia and Siemens ponder their options, funneling more money into this business doesn’t seem like the way to go. Nokia sent Reuters a statement after the Journal‘s article appeared, noting, “Multiple options continue to exist for NSN and these are reflective of the company’s performance in terms of both innovation and financial results.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.