Nokia Corporation (ADR) (NOK) Future Hinges On Patent Leverage

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Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) has sold its traditional phone business, but the company is holding onto one of its greatest assets: the patent portfolio. The company will not be using those patents to protect business anymore, opening it up to licensing agreements. That could be lucrative for Nokia, and it is an important business to watch for the company’s shareholders.

Nokia Corporation (ADR) (NOK) Future Hinges On Patent Leverage

A new report from ABG Sundal Collier, a Norwegian Investment Bank that has taken an active interest in the Microsoft Corporation acquisition of Nokia Corporation smartphone business, has released a new note on the future of Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) patent licensing.

Nokia patents

ABG Sundal Collier does not take the strength of the Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) patent portfolio as self evident; the analysis laid out the reasons to believe the portfolio is a valuable asset. According to the report, Nokia’s victory in U.S. patent cases, and the valuable cross-licensing agreement with Microsoft Corporation (NASDAQ:MSFT), are clear indications of the value of the patent portfolio.

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) may now spend its time actively pursuing large fees for the patents it holds, because it no longer needs to use them to protect ongoing business. Another positive trend is the global expansion of the software market. This means that patents become more valuable overall because the business brings in more money.

If Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) is able to charge a licensing fee of just 1 percent, a third of the QUALCOMM, Inc. (NASDAQ:QCOM) fee, the company could bring in $5 billion a year on the business. All of this only applies, of course, after the deal with Microsoft Corporation (NASDAQ:MSFT) expires in 2020.

Valuing the Nokia portfolio

Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) certainly holds a valuable portfolio of patents, but their valuation is difficult. The analysts at ABG Sundal Collier readily admit that. Patent licensing is a quiet business. Most of the work is done by teams of lawyers, and the entire process is beneath a shroud of non-disclosure agreements.

There is also what ABG Sundal Collier calls “a number of players which more or less habitually are disrespectful of patent laws/rules.” These are patent trolls, or else companies in China that do not pay license fees. Secrecy and lawlessness make the patent business difficult to value. Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) still stands to benefit from its holdings, however.

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