Counterpoint: Apple not eating humble pie

Metaratings
16 Jun 2011
00:00
Article

The headlines all concur, Nokia wins the patent battle with Apple, but the real facts around the settlement may never come fully to light. That’s because neither party had anything to gain by continuing expensive litigation. Any loss of face by Apple and bottom line gains by Nokia will likely be short lived.

I’m afraid I cannot agree with my learned colleague and respected industry journalist, Michael Carroll, when he states the result “is a wake up call about the power the Finnish vendor still wields in the mobile device sector.” The mere holding of patents, and the licence fees generated from them, cannot and will not save Nokia unless it can continue investment in R&D and keep developing new technology.

Nokia’s decision to ‘outsource’ its Symbian development to Accenture, curtail its Meego ambitions and bank its future on Microsoft’s WP7 are signs that the ‘power,’ like its sales, are in reality, dwindling.

Expert pundits have calculated that Nokia probably netted around $608 million plus as a one-time payment in the settlement representing a 1% royalty on all 110 million iPhones sold up until the first quarter at an average selling price of $550 per unit.

That represents a little more than two days revenue for Apple. That calculation is based on other similar historical patent case payments such as RIM to NTP, Qualcomm to Broadcom and Nokia to Qualcomm.

Based on these yet unconfirmed calculations, recurring revenues should produce around $138 million per quarter. Hardly enough to bolster Nokia’s flagging sales, surely? Of course, in the short term, the royalties will go straight to Nokia’s bottom line and make the second quarter look artificially good.

A point picked up by Morgan Stanley analyst Patrick Standaert when he said that Nokia’s quick win doesn’t change the long-term picture. The long-term health of the company depends on products not royalties. Unless the terms are made public, it is also unlikely to have any effect on Nokia’s rising cost for insuring debt.

For Nokia CEO, Stephen Elop, it will certainly alleviate investor pressure until the first long-awaited WP7 devices hit the market late this year, but the deal is hardly the sign of ‘power wielding patent holder.’ If the litigation case looked so unbeatable, surely traditional wisdom would have been to hit Apple for all it was worth? Perhaps time was not on Elop’s side, because after years of suit and counter-suit, he only recently proclaimed that Apple was not the ‘real enemy.’

It could be some time before the real story comes out. Maybe Steve Jobs, heartened by Elop’s ‘not the enemy’ comments, felt some compassion for Nokia and, more worried about tackling Google and Android alone, held out a conciliatory hand with an offer to settle.

Perhaps Elop’s comments came after talking with Steve Jobs and were a precursor to the settlement announcement. An even stranger theory may be that Apple has negotiated options to buy the said patents in future, and should Nokia ever find itself in hot water have an escape route.

Ah, one can see the conspiracy theories flowing freely! The bigger story, however, lies in the almost continuous flow of patent cases this industry produces.

The cost of registering, protecting and litigating ‘ad nausea’ must be staggering. Maybe the two Steves sensibly worked out that an amicable settlement was a cheaper option than their combined legal costs. There must be a lot of lawyers drowning their sorrows this week!

Original article URL: http://tonypoulos.com/blogs/apple-eating-humble-pie-hardly/

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