Now ALU's patents are in the spotlight

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Now ALU's patents are in the spotlight

Analysts suggest the company's patent portfolio, much of it from Bell Labs, could be worth more than its market cap

By CAROLINE GABRIEL

Published: 6 August, 2011

READ MORE: M&A | Alcatel-Lucent | Patents/IPR

If the markets have their way, there could be a mass transfer of wireless industry patents from the old players in the sector to Google and Apple. The latest massive IPR holder to be supposedly mulling a sale of its patents is Alcatel-Lucent, a huge player thanks to Lucent's ownership of Bell Labs, the former powerhouse of US telecoms innovation. Sale of these assets could fetch more than the market capitalization of the French group, suggested Bloomberg, echoing similar points made about Motorola Mobility.

As Google searches for patent treasure chests with which to build its defences against the litigation of Apple, Microsoft and Oracle, it may have Kodak, InterDigital, Motorola and possibly even ALU to choose from. All these firms' shareholders are, of course, mindful that Nortel's huge array of IPR fetched $4.5bn even in a bankruptcy court because of the arms race ongoing between the mobile software giants - a sum that was greater than the total paid for all its product businesses.

Many of the suggested deals will not happen, but there is an obvious shift of competitive differentiation, and therefore of both R&D and patents wars, from the old areas of wireless technology and industrial design, to the software experience. The Bloomberg report sees an opportunity here for ALU, whose share price has been in decline despite an upturn in its financial performance. The value of its IPR portfolio could be equivalent to the company's market cap given its depressed share value, allowing investors to buy into its current earnings "for free", suggests the analysis.

The company currently has a market cap of between $7bn and $8bn, while the patents could be worth double the price paid for Nortel's, analysts think - making it seriously undervalued. Alkesh Shah, an analyst with finance house Evercore Partners, told the publication that "the patent portfolio is one of the hidden assets of value that I don't think investors have paid much attention to".

The situation will get really interesting if major patent holders like Ericsson and Nokia start to deploy their weapons more aggressively - and if any of the upstart mobile players get too above themselves, of course there is always the king of wireless IPR, Qualcomm, to deal with.

Meanwhile, Microsoft has hit back at Google's recent claims that there was a hostile plot against Android in the IPR world, involving Microsoft, Apple and Oracle. First, Microsoft's general counsel Brad Smith wrote on Twitter that the Windows giant had invited Google to join it in its bid for Novell patents, an offer that was declined. Google's chief legal officer responded that the invitation had been a "trap" to prevent Google from using those patents to defend itself against litigation. "We didn't fall for it," he said. Then Shaw was tweeting again, saying Google did not cooperate because "they wanted to buy something they could use to assert against something else … SO partnering with others and reducing patent liability across industry is not something they wanted to help do."