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Trade Body Says HTC Violating Apple Patents, Bans Some Imports
DECEMBER 19, 2011 AT 2:04 PM PT
In a closely watched case, the U.S. International Trade Commission on Monday ruled that Taiwanese cell phone maker HTC is violating Apple patents and ordered an import ban on some products.
However, the ban will not take effect until April, the ITC said in a ruling.
“Notice is hereby given that the U.S. International Trade Commission has found a violation of section 337 in this investigation and has issued a limited exclusion order prohibiting importation of infringing personal data and mobile communications devices and related software,” the agency said. “The Commission has determined that exclusion of articles subject to this order shall commence on April 19, 2012.”
The ruling had been delayed several times.
Judgment Day Looms for Apple, HTC on Wednesday
BY IAN SHERR
Apple Inc.'s claims that some smartphones running Google Inc.'s Android software copy its inventions are approaching their first big judgment day in the U.S.
The International Trade Commission in Washington on Wednesday is expected to rule on whether some phones made by HTC Corp. violate Apple's patents. The ruling could lead to a ban on handsets sold by the Taiwanese company, which uses the Android operating system and is the No. 3 smartphone provider in the U.S. market, according to research firm Nielsen.
Intel creates unit for smartphones, tablets
Chip maker aiming at growing market where it’s not dominant
By Benjamin Pimentel, MarketWatch
SAN FRANCISCO (MarketWatch) — Intel Corp. on Wednesday said it has set up a new unit devoted to smartphones and tablets in a strong sign that the chip giant plans to focus more on the fast-growing devices.
The company’s mobile-communications group combines four units that had been focused on different areas, from smartphones, wireless mobility, and baseband communications to netbooks and tablets.
Click to Play
RIM: Headed for zero or a takeover?
Rolfe Winkler and Evan Newmark look at the decline of Research In Motion. (Photo: Reuters)
The new group will be led by Hermann Eul and Mike Bell, a respected technology executive who had previously worked at Apple Inc. (NASDAQ:AAPL) and Palm Inc.
“We’re aiming to speed up and improve the development of Intel-based mobile devices,” said Intel (NASDAQ:INTC) spokesman Robert Manetta.
The move comes as Intel, the world’s biggest semiconductor company, struggles with a slowing PC market and tries to expand its presence in the mobile market where chips based on the designs of ARM Holdings PLC (NASDAQ:ARMH) are dominant.
On Monday, Intel cut its fourth-quarter revenue forecast, citing the hard-disk drive shortage that has caused major disruptions in the PC industry. Read more about Intel lowering its outlook on impact of Thai flooding.
Here's how it is positive: they bought ammunition on the cheap and it didn't work.
They PUBLICLY said they are rethinking the S3 purchase. Clearly they will have to spend more on something else to fight Apple. Can it be any clearer?
Very Promising for IDCC: HTC rethinking S3 purchase in light of loss at ITC:
HTC Loss to Apple on Patents Casts Doubt on S3 Graphics Buy
By Susan Decker - Nov 21, 2011
HTC Corp. (2498)’s loss in a patent infringement case against Apple Inc. (AAPL) casts doubt on its decision to spend $300 million buying S3 Graphics Co. to boost the chances of a licensing deal to end the dispute.
The U.S. International Trade Commission said yesterday that S3 Graphics’s patent rights weren’t violated by Apple, rejecting a request for an order that could have limited imports of some Mac computers, the iPhone and iPad. The commission gave no reason for its decision. HTC said it may challenge the ruling in a U.S. appeals court that specializes in patent law.
HTC, which sold the most smartphones in the U.S. in the third quarter, said it would buy Fremont, California-based S3 Graphics less than a week after a trade agency’s judge issued his findings in the case in July. S3 Graphics was part-owned by HTC Chairwoman Cher Wang, and Citigroup Inc. analyst Kevin Chang said at the time HTC could have just licensed the patents.
A decision against HTC “calls into question the rationale of the S3 acquisition,” said Chen Fu-li, an analyst at E Sun Securities Co. in Taipei who has a “buy” rating on HTC shares. “It’s the final decision so it’s quite important. A negative decision could put pressure on HTC’s shares.”
S3 Graphics Purchase
HTC slid as much as 6.1 percent, the biggest intraday decline in almost two months, to NT$598 before trading at NT$613 as of 10:45 a.m. in Taipei trading today. The stock has tumbled 50 percent since a record high of NT$1,238 on April 28.
HTC Chief Executive Peter Chou has built the former contract manufacturer into a global brand by customizing its phones for carriers including Verizon Wireless and Sprint Nextel Corp. (S) The company almost doubled its revenue last year and has posted six consecutive quarters of record profit.
S3 Graphics makes image-compression technology, and its Texture Compression feature is used in Nintendo Co.’s Wii and Sony Corp. (6758)’s PlayStation portable gaming systems. The purchase by HTC included about 235 patents, mostly related to graphics technology.
“S3 can be innovative and they came up with some nice products, but whether they are relevant to Apple is debatable,” Shaw Wu, an analyst at Sterne Agee & Leach Inc. in San Francisco, said in an interview. “Apple has a lot of patents, so it’s going to be tough to beat Apple.”
Graphics Patents
The decision marks the first time the six-member commission has ruled on one of the dozen cases at the agency stemming from the battle for the smartphone market. S3 Graphics has another trade case pending against Apple over four other patents, and HTC has two of its own cases, including one in which it asserts patents obtained from Google Inc. (GOOG), the developer of the Android operating system.
“We are disappointed, but respect the ITC’s decision,” HTC General Counsel Grace Lei said in an e-mailed statement yesterday. “While the outcome is not what we hoped for, we will review the ruling once the commission provides it and will then consider all options, including appeal.”
U.S. trade Judge James Gildea on July 1 found that some Apple Macs infringed two S3 Graphics patents related to graphics chips, while the mobile platform for the iPhone didn’t infringe. The six-member commission reviewed the entire decision, including the effects of Apple’s agreements with Intel Corp. (INTC) and Nvidia Corp. (NVDA) for graphics chips.
Patent Fights
HTC was counting on a victory to bolster its patent battles with Apple. The commission is also reviewing an agency judge’s determination that HTC infringed two Apple patents, with a decision expected Dec. 6, and may take a look at a judge’s findings that cleared Apple of infringing HTC patents.
“Apple’s win strikes the first blow in its wide-ranging patent fight with HTC,” Mike Abramsky, an analyst at RBC Capital Markets in Toronto, said in a note to clients.
Kristin Huguet, a spokeswoman for Apple, said the Cupertino, California-based company had no comment.
HTC and Apple are among smartphone makers, including Samsung Electronics Co. and Motorola Mobility Holdings Inc., using patents to challenge competition in a market projected by researcher IHS Inc. to reach $206.6 billion this year.
Apple is targeting phones and tablet computers that run on Google’s Android operating system. Apple, which has two cases at the trade commission against HTC, is seeking to block imports of HTC phones that run on Android.
Top Seller
Smartphone sales by volume increased 42 percent in the third quarter, according to research firm Gartner Inc. HTC became the top seller of smartphones in the U.S. in the third quarter, with 24 percent of the market, above Samsung Electronics’s 21 percent and Apple’s 20 percent, according to Palo Alto, California-based researcher Canalys.
Gildea’s initial ruling didn’t apply to Apple mobile devices or Mac computers with Nvidia graphics processing units that have an implied license to the patents, the judge determined. The judge also found that two other S3 patents were invalid, as were aspects of the two patents found to be infringed.
The decision was limited to a “small software module in Mac OS,” Apple said in a Sept. 23 filing with the agency.
Apple argued that the patents were invalid and not infringed. It also contended that Advanced Micro Devices Inc. (AMD), not S3 Graphics, is the proper owner of the patents. AMD has filed a suit in federal court seeking an ownership ruling. The commission denied AMD’s request to intervene in trade case.
Apple Sales
Even if a violation is found, Apple argued in the filing, the commission shouldn’t ban any imports until a further hearing on AMD’s claims and on the effect on the public interest of halting any products.
S3 Graphics responded in its own filings with the agency that AMD didn’t own the patents, and other electronics compete with Apple’s products, so there’s no harm to consumers or the overall market demand for smartphones by blocking the Apple products from the U.S.
The iPhone brought in $47 billion in sales last fiscal year, or 43 percent of Apple’s revenue, while Macs generated $21.8 billion in sales, 20 percent of Apple’s revenue. HTC said in its August trade complaint that it had about $5 billion in U.S. sales last year.
I believe that the amount shown is for the 'Value' of the stock on the date of the filing, not the 'Cost' of the stock.
If you take the value of Paulson's holdings it is the same per share value as Vanguard's and Barclays' etc. That is, $49.82/share.
Barclays Capital Rises, ‘Big-Boy Checkbook’ in Hand
BY MICHAEL J. DE LA MERCED
The American pipeline operator Kinder Morgan struck one of the biggest deals of the year nearly a month ago with its $21.1 billion purchase of a rival, the El Paso Corporation.
What was just as notable was the financing backing the deal — a $13.3 billion loan package arranged by Barclays Capital, one of the largest financing efforts that the bank had made on its own. It was the second time this year that the British investment bank took the initial financing of a megadeal upon its shoulders. In August, Barclays lent $8.3 billion to Hewlett-Packard to help pay for its $11.7 billion purchase of the British software company Autonomy.
Those loans are part of Barclays’ continued efforts to move into the top ranks of advisers on mergers and acquisitions, a campaign begun when the London bank purchased the bulk of Lehman Brothers’ North American investment bank in 2008.
As of last Thursday, Barclays was ranked seventh among worldwide merger advisers, having participated in 148 deals worth more than $290 billion, according to data from Thomson Reuters. That is a step up from the ninth place that the company held in each of the last three years.
And in terms of deal lending, Barclays ranks in the top five this year, with more than $28 billion in syndicated loan proceeds, according to Thomson Reuters.
“We’ve long had a big-boy M.& A. business,” Hugh E. McGee III, Barclays’ head of investment banking and a Lehman veteran, said in an interview. “And now we’ve got a big-boy checkbook.”
Yet the company still has a way to go. It trails its more established competitors, including JPMorgan Chase and Bank of America-Merrill Lynch, both in merger advice and in lending.
JPMorgan, for instance, is ranked third in deal advice and second in merger lending. And it still claims the crown for the biggest deal loan since the 2008 financial crisis, having initially shouldered a $20 billion loan to AT&T for its proposed $39 billion takeover of T-Mobile USA, a unit of Deutsche Telekom.
And a lending business does not guarantee a higher spot on the league tables, or rankings. BNP Paribas, for instance, ranks seventh for deal lending this year, but 13th for mergers advice. Goldman Sachs, on the other hand, ranks ninth in lending but leads the mergers league tables.
Mr. McGee concedes that his company still has some work to do. But he added that Barclays had made progress, including building investment banking operations in Europe and in Asia.
That campaign also includes lending to deals by longtime clients, as in the case of Kinder Morgan and H.P.
Barclays began discussions with Kinder Morgan on Sept. 8 about financing the El Paso takeover, several months after Kinder Morgan had begun discussing the deal with the American investment bank Evercore Partners, according to a regulatory filing.
What Barclays ended up providing was a three-part loan package that the bank initially shouldered on its own, though on Oct. 31 it sold pieces of the loan to 10 other banks.
As with the Hewlett-Packard and AT&T single-bank loans, the financing provided some speed and certainty to Kinder Morgan, allowing the company to avoid the normally time-consuming process of finding enough lenders to provide capital. It also helped clamp down on leaks by limiting the number of people with knowledge of the transaction.
While the loan appeared to be a risk — it was not rated investment grade — Barclays executives said they believed in the deal, which would create the biggest American operator of oil and natural gas pipelines. Kinder Morgan, after all, was a longtime client.
Barclays’ single-bank loan offerings had some extra benefits for the bank’s clients as well. Along with its loan to H.P., Barclays helped the technology giant hedge the currency risk in its Autonomy deal without tipping off others in the market.
Still, to some, Barclays’ loans signify an effort to buy a better spot on deal league tables.
And the bank has gotten into some trouble for its lending practices before: last month, the company settled a shareholder lawsuit over the $5 billion takeover of Del Monte Foods, in which Barclays advised the seller. The plaintiffs had argued that Barclays, which advised Del Monte and provided financing to potential buyers, had an incentive to prevent a robust auction of the food company. Barclays ultimately agreed to pay $23.7 million and gave up $21 million in fees.
But Mr. McGee said the bank’s aim was not to rely on lending to get into deals. Barclays is less likely to make a giant loan commitment if it is not one of the lead advisers on a transaction, he said, and is being discerning about to whom it lends.
“We want to lead with our relationships and then use our balance sheet,” he said. “We don’t want to lead with our balance sheet.”
Apple Is Going to Spend a Lot of Money on … Something
Published on October 31, 2011
by Peter Kafka
Apple is going to plow $8 billion into capital expenditures in the next 12 months — 73 percent more than it spent last year. Where’s that money going to go?
GigaOm, referencing a UBS research note, points out that $900 million will go into Apple’s retail outlets. The company says it will open another 40 stores in the next year.
Apple is vague, of course, about where the rest of the $7.1 billion will go, but references “product tooling and manufacturing process equipment, and corporate facilities and infrastructure, including information systems hardware, software and enhancements.”
So: Lots of places.
It’s tempting to assume that the bulk of the money goes into more iCloud projects, like its North Carolina data center. And we do know, for instance, that Apple is now building a giant solar farm to help power that data center.
But Apple really isn’t in the habit of hand-tipping, and all we really know is that $7.1 billion is a lot more than $4 billion, which is what Apple spent on non-retail capex last year.
Pegatron lands higher-than-expected iPhone 4S orders, says paper
Commercial Times, October 12; Steve Shen, DIGITIMES [Wednesday 12 October 2011]
Pegatron Technology has landed orders for 15 million units of the iPhone 4S from Apple with shipments reaching 2-2.5 million units in the fourth quarter of 2011, the Chinese-language Commercial Times has cited sources as saying. Earlier reports indicated that the volume of Pegatron's iPhone 4S oders would be only 10 million units.
Pegatron has also strengthened its deployment for metal chassis, aiming to also land orders for the iPad 3 from Apple as well as ultrobook orders from branded notebook vendors, said the paper, adding that Pegatron has already secured ultrabook orders from Asustek Computer and Lenovo.
Pegatron has posted consolidated revenues of NT$53.78 billion (US$1.77 billion) for September, increasing 15.3% from the previous month. Third-quarter consolidated revenues amounted to NT$152.1 billion, up 48% on quarter, the paper revealed.
Amazon may be a player as well, as they are chasing PALM for an operating System:
Will Amazon Buy Palm for Its Patents?
BY EVELYN M. RUSLI
To protect Fire, will Amazon buy Palm?
Shares of Amazon fell about 2 percent in the first hour of trading on Friday, amid speculation that the online retailer might be angling to buy Palm, the fallen mobile device business that Hewlett-Packard bought last year for $1.2 billion.
According to technology site Venturebeat, which earlier reported on Amazon’s interest, the companies are engaged in “serious negotiations,” though there are other suitors.
Palm, purchased last April, was supposed to form the foundation of H.P.’s mobile business.
The company, which invented the first personal digital assistant, offered H.P. a line of smartphones and the webOS platform, a mobile operating system that competes with Google’s Android and Apple’s iOS systems. At the time, Todd Bradley, an executive vice president at H.P., said it would provide the “ideal platform to expand H.P.’s mobility strategy and create a unique H.P. experience spanning multiple mobile connected devices.”
But the honeymoon didn’t last long.
One year later, the unit was bleeding cash and H.P. was cooling on its personal computing business. As part of a larger overhaul, H.P. announced that it was abruptly shutting down its webOS device business “and exploring strategic alternatives for webOS software.” That business, which made up the bulk of H.P.’s “corporate investment” segment made $266 million in revenue in the third quarter, but reported an operating loss of $332 million. H.P. also notified analysts that fourth quarter financials will reflect about $1 billion in charges related to its webOS write-down.
Though the rapid fall of Palm, seems to be yet another red mark on the technology giant’s scorecard, H.P. may wring some value out of Palm, if Amazon, or another mobile device maker, makes a bid. After this week’s splashy debut of Kindle Fire — Amazon’s highly anticipated touch tablet — there’s little doubt that the online retailer is getting serious about its mobile devices. While the Fire’s price point of $199 and its limited features, seems to position it as a non-direct competitor to Apple’s popular iPad, analysts say, Amazon may be looking to acquire patents as a defensive maneuver. And Palm, with its trove of patents related to mobile software and devices, could help Amazon stave off future litigation, from competitors like Apple, or Microsoft.
“I don’t think anyone believes that Apple and Amazon will not have significant competitive skirmishes in the future,” said Jordan Rohan, a Stifel Nicolaus analyst told DealBook on Friday. “The value of I.P. related to mobile has gone up—even if there was no palm devices in the future, it would still be valuable.”
Though its unclear just how valuable Palm’s trove of patents is, Mr. Bradley of H.P. noted last year, that it “possesses significant I.P. assets.”
Intellectual property has been a key driver of several multi-billion dollar deals this year. With several technology giants jockeying for a larger piece of the mobile market, patents have been critical, to ward off litigation, or to push rivals to sign expensive licensing agreements. In July, Apple and Microsoft led a group of technology companies in a $4.5 billion purchase of patents from Nortel Networks. Google, which lost in the bidding, went on a patent spree in the following weeks, buying a trove from I.B.M. and then later, paying $12.5 billion for Motorola Mobility, a holder of more than 17,000 patents.
“There’s a war of intergalactic proportions brewing, and instead of an army, they’re coming armed with patents,” said Mr. Rohan.
Still, from a strategic standpoint, the purchase of a company like Palm would be somewhat of a departure for Amazon, which has not historically been focused on buying companies to build out its consumer technology products. Though its moving towards building better mobile devices, its focus, unlike its competitors, seems to be on selling content, said Scott Tilghman, a Caris & Company analyst. “Amazon is focused on driving consumption of its own media offerings and getting into other forms of mobility, specifically the smartphone space, doesn’t seem to be part of their core competency or their core business strategy.”
Wanna be a mobile player? Get ready to spend on IP
By Derrick Harris Sep. 26, 2011, 12:34pm PT No Comments
Patent acquisitions and litigation dominated the wireless industry in 2011, and it looks like we should expect more of the same going forward. If anything, Mobilizepanelists Efrat Kasznik, president of Foresight Valuation Group, and Brian Hinman, VP of intellectual property and licensing at InterDigital, seem to think it’s only going to get worse for anyone wanting to be taken seriously as a mobile player.
Hinman calls it a “fascinating environment that we’re in right now,” which is far removed from the wireless industry of 10 years ago. Now, he said, companies that don’t have a strong portfolio of wireless patents can’t really be taken seriously as market leaders because they’ll be buried in lawsuits if they try. That’s why Google is on the patent warpath buying up IP from Motorola, IBM and trying to get its hands on some of Nortel’s bankruptcy auction items.
Where this all leads, Hinman thinks, is a series of no-dollar-value agreements between parties that recognize “mutually assured destruction.” Essentially, he predicted, mobile companies will all have such large caches of patents that they’ll agree to disagree and to not sue each other in order to save the inevitable counterclaims that would accompany any lawsuit.
All the legal action and IP acquisition has led to talk of a patent bubble, but Kasznik doesn’t think that’s necessarily the case. Google bidding $900 million for Nortel’s patents or buying Motorola for $12.5 billion might seem high, but the amount of work Nortel put into developing its IP and Motorola’s status as an operating business have to be taken into consideration when evaluating those prices.
And with patent warfare continuing to be the norm, she said startups and their VC backers have to change the way they think about patents. “The time to start thinking about IP is now,” she explained, because as soon as you become successful, someone’s going to come after you. It’s not just large companies such as Apple or Google that will do it either, but, Kasznik said, also non-practicing entities (read: “patent trolls”) that have accumulated IP as a result of the telecommunications bust.
Hinman makes one more suggestion that wireless companies should heed, even though it’ll be painful: Think outside of the United States Patent and Trademark Office. It’ll be expensive and time-consuming to protect IP by obtaining patent protection across the globe, but it’s probably necessary. Already, he noted, Apple and Samsung are battling in the courts of various countries, and patent filings are piling up in China as companies look to ensure they’re able to maximize their IP investment in what should be a hotbed of industry growth.
If you assume the dilution of the warrants up to 50M shares then assume 1B in cash at sale as the warrants have to be exercised and over $300M in cash paid in.
And GE:
Patent Expert: Google Buying Motorola was a Bad Deal
MOUNTAIN VIEW, USA - A patent expert is of the belief that the Google-Motorola Mobility path-breaking deal worth US$12.5 billion was actually a waste for Google.
The sole reason behind such analysis is that Motorola sold its best patents a long time ago, and what Google has actually acquired is nothing worth an applause.
The founder and chairman of patent consulting firm M-Cam, David Martin, believes that the entire deal was a waste, and what Google actually acquired were "crap patents" as Motorola sold off the best patents, and its most valuable assets when Motorola split into two companies, Motorola Mobility and Motorola Solutions.
Martin in a interview to Bloomberg said "it's an immense mistake, What they've bought is crap. Motorola had already sold off its good assets. Back in the early years, Motorola sold off some MPEG patents to GE. After that, they took a bunch of the Freescale patents and sold those off".
What translates the entire story is that in a case of fending off the likes of Apple and Microsoft and keeping its Android eco-system safe, Google has not been very successful, and it still is very likely to get sued in the near future by the big-wigs of the telecommunication industry.
Freescale spun off from Motorola:
http://www.frost.com/prod/servlet/market-insight-top.pag?docid=11127739&ctxixpLink=FcmCtx5&ctxixpLabel=FcmCtx6
American Express Seeks Acquisitions to Expand E-Commerce, Mobile Payments
By Olga Kharif - Sep 14, 2011
American Express Co. (AXP) is looking at large international acquisitions that will help it benefit from booming demand for mobile payments and online commerce in emerging markets, said Executive Vice President David Messenger.
The New York-based company, the biggest credit-card issuer by purchases, is considering deals in developing regions such as China, and investments in or purchases of smaller Silicon Valley startups with valuable technology, Messenger said in an interview this week. Last year, American Express agreed to acquire Loyalty Partner, a marketing firm with customers mainly in Germany, Poland and India, for $660 million.
“You shouldn’t assume that’s the largest acquisition we can do,” said Messenger, who was hired last year to run a new online and mobile business unit at American Express. “We are very active, and acquisitions are a key component of our strategy.”
American Express wants to gain a bigger foothold in the growing market for Internet commerce and payments over wireless devices, seeking to challenge rivals such as Visa Inc. (V) and Google Inc. (GOOG), which have announced their own mobile-transaction services. Payments made with mobile phones alone will reach $670 billion globally by 2015, up from $240 billion this year, according to consultant Juniper Research.
In developing countries such as India and China, a growing number of consumers are acquiring credit cards and smartphones. China will surpass the U.S. as the world’s largest credit-card market by 2020, MasterCard Inc. (MA) said last year.
Mobile Transactions
American Express executives expect new payment methods, such as transactions made on mobile phones, to leapfrog traditional plastic cards in those countries, Daniel Schulman, group president of enterprise growth, said in August at a company meeting.
Acquisition targets may be similar to Loyalty Partner, David Robertson, publisher of industry newsletter the Nilson Report, said in an interview.
“That loyalty marketing company is indicative of what AmEx sees as a model,” said Robertson, who is based in Carpinteria, California. “There will be indigenous companies in emerging markets AmEx may see as desirable.”
Robertson said the company may seek to generate revenue from special offers and marketing programs, in addition to payments.
American Express is interested in making “targeted” acquisitions of companies “with unique assets that complement our businesses and capabilities,” Chief Executive Officer Kenneth Chenault said in August.
Past Purchases
Besides Loyalty Partner, American Express agreed last year to buy Accertify Inc., which helps merchants combat fraudulent transactions, such as during online purchases.
Loyalty Partner helps companies manage loyalty programs and cards and sends out direct mail and e-mail newsletters. American Express has also made investments in smaller companies. In April, it led a $19 million investment into Payfone, a provider of mobile payments.
American Express announced a program in March called Serve, an electronic wallet that lets consumers make payments to each other and retailers via phones and computers. On Aug. 1, Verizon Wireless said it will integrate Serve on many of its mobile phones and tablets. American Express aims to market the service more widely in the coming months, Messenger said.
For Bargain Stocks, Check the Patent Office
By JACK HOUGH
Anyone can spot a low price/earnings ratio. But figuring out which companies hold undervalued patents can provide a real investing edge.
Just this past week, Google agreed to pay $12.5 billion for Motorola Mobility, a struggling cellphone maker with a vast patent stash. Google had earlier been outbid by Microsoft, Apple and others on thousands of patents held by Nortel Networks, which is in bankruptcy.
These patent grabs suggest tomorrow's dominant smartphone or tablet is a three-legged stool built from software, hardware and communications—and companies are in a race to add rights to whichever legs they are missing. More broadly, big patent portfolios are increasingly being used as financial weapons.
A recent boom in patent sales is lifting patent values in general, says Nir Kossovsky, executive secretary at the Intangible Asset Finance Society, a Pittsburgh research group. And that is an opportunity for investors.
Figuring out which companies own which patents is easy. The U.S. Patent and Trademark Office digitized its records more than a decade ago. Putting a price on each patent is the hard part. You have got to project a patent's royalty streams, find similar patents that were sold recently or determine what it would cost to produce a similar patent.
Valuing just one patent can take weeks and cost tens of thousands of dollars, says Michael Friedman, a managing director at Ocean Tomo, a Chicago provider of patent services.
The Patent Board, a research group in Westmont, N.J., has an automated way of guessing which patents are most valuable: citation analysis. The more an existing patent is referred to in future patent applications, the more valuable it is presumed to be.
The research group doesn't publish patent values but rather ranks companies on "technology strength," which it bases in part on patent quality. WSJ.com publishes a Patent Scorecard for one industry each week based on these numbers. Cooper Industries, based in Dublin, ranked first among industrial components makers on a recent list.
"You can't know the exact value of a portfolio of patents, but you can make broad judgments," says Patent Board President Karl Wilhelm. "Eastman Kodak's patents are probably worth more than the company's recent value of a half-billion dollars. I can't imagine Apple's patents are worth more than $5 billion, and its value is more than $300 billion."
Of course, Apple's profits and pizzazz have a bigger influence on its stock performance than its patents, and making a patent-based bet on a company like Kodak is risky.
Mr. Friedman cites InterDigital, based in King of Prussia, Pa., as having the lowest market value among companies that can provide the third leg of Google's smartphone stool: high-speed communications patents. That is a tempting tip, but InterDigital's share price already has jumped more than 50% since mid-July to about $63, or 31 times projected 2011 per-share earnings—plenty pricey compared with most stocks.
A diversified basket of patent bets seems safer. The Guggenheim Ocean Tomo Patent exchange-traded fund is down 6.3% since its December 2006 inception, a better showing than the broad-market iShares S&P 500 ETF, which has lost 12.9%. The Guggenheim ETF is based on an Ocean Tomo index selected using a 56-ingredient recipe that helps computers guess which patents are most valuable.
With the stock market looking wobbly—or worse—and the threat of a double-dip recession looming, another tactic is to skim lists of patent-rich companies for ones with modest valuations, solid balance sheets and the ability to deliver handsome dividends, with or without a jump in the value of their patents.
Johnson & Johnson, Intel and Pfizer are among companies ranked top in their industries for technology strength by the Patent Board. The Ocean Tomo 300 Patent Index currently counts Microsoft, Royal Dutch Shell and IBM as its largest members. These six companies are on average one-quarter cheaper than the broad market based on earnings, and they yield an average of 3.6%.
For do-it-yourselfers, there is a patent-search tool at www.uspto.gov.
One more factor bodes well for patent values: the recent rise of "nonoperating entities," or, less politely, "patent trolls." They grab patent portfolios for the purpose of suing other companies for violations and securing cash settlements.
That is forcing tech firms to scoop up idle patents defensively, creating a seller's market, says Jorge Torres, an intellectual-property lawyer in New York. So patent-stuffed companies might be richer than they look.
H-P, Google moves fuel patent speculation
IP experts say Palm, Kodak portfolios may draw increased interest
By Dawn Lim, MarketWatch
NEW YORK (MarketWatch) — It’s been a big week for those in the patent business, and signs are indicating that more action may be coming in the months ahead.
Palm
Palm was an early pioneer in smartphones with the Treo, and had amassed more than 1,650 patents before its acquisition by H-P last year.
Earlier in the week, Google Inc.’s (NASDAQ:GOOG) $12.5 billion purchase of Motorola Mobility Holdings Inc. (NYSE:MMI) showed how a sweet an offer -- a 63% premium over Motorola’s most recent closing price -- that tech companies would make to stake out large patent holdings.
On Thursday, Hewlett-Packard Co. (NYSE:HPQ) said that it would be exiting the smartphone market and pulling the plug on the webOS mobile-operating system that it bought from Palm Inc., which ignited speculation about the value of a patent portfolio that may now be up for grabs.
Also during the week, Eastman Kodak Co. (NYSE:EK) shares jumped 25% on news that its patent portfolio was being marketed.
“We have seen significant interest in the acquisition of large patent portfolios, as the market is placing a premium on the strategic value of ownership,” said James Malackowski, chief executive of intellectual property services firm Ocean Tomo. “This is especially true given current market inefficiency, which limits pricing transparency.”
Malackowski said he sees a potential deal involving the Palm/H-P patents as “analogy” to Google’s purchase of Motorola.
“Both have patent portfolios relevant to mobile operators and a history of cross-licensing agreements,” he said.
Why Google bought Motorola
Google's purchase of Motorola Mobility was cheered by the street, as Google looks to control more of its handset maker of its Android phones. The deal also gives Google access to a library of patents, which can be used to protect the Android operating system, George Stahl reports. (Photo: AFP / Getty Images.)
Cross-licensing agreements serve as permission slips allowing companies to be protected by one other’s patents.
Ocean Tomo has played a role in a number of closely-watched patent transactions, such as valuing handset-related patents in Nortel Networks Corp.’s (OTN:NRTLQ) 4,500-strong patent portfolio that was sold last month for $4.5 billion to a consortium of tech companies that included Apple Inc. (NASDAQ:AAPL) , Microsoft (NASDAQ:MSFT) and Research in Motion Ltd. (NASDAQ:RIMM) .
Perceptions of a bull market for patents have pushed some companies into exploring selling, rather than licensing out their intellectual property holdings.
While a patent owner can get a steady revenue stream from licensing out intellectual property, “the challenge on licensing is delayed gratification. It takes an ongoing sales force and more effort,” said Tyron Stading, chief technology officer at Innography, which provides data on intellectual property. “It’s not like winning the lottery.”
On the flipside, paying licensing fees to a patent-holder “is buying protection so you don’t get a missile fired at you,” said Stading, “It’s not the same thing as buying a missile.”
Palm, one of the early pioneers in the smartphone arena, reported more than 1,650 patents granted and applied for in its fiscal year ended in May 2009 -- about 11 months before the H-P acquisition.
Palm, bought up by H-P for $1.2 billion in cash last year, has been in spats with Apple over whether its Pre handset infringed on its patents, but no lawsuits between the two companies were filed over the matter. Apple has sued companies such as Samsung, HTC and Motorola over their Android smartphone and tablet devices.
“The trend of companies thinking they can monetize their patents by selling them would be disturbing if everybody did it en masse,” said John Amster, chief executive at RPX Corp., a company that buys patents to guard clients from intellectual property lawsuits. Not everyone would have an equitable slice of the pie, he said. “This would have a devastating impact on innovation.”
But it’s a solution for companies in need of fast cash.
Kodak’s stock has been down 43% this year as the once-dominant film and imaging company has struggled to find its footing in the digital world.
In July, the U.S. International Trade Commission remanded part of a patent case bought by Kodak against Apple and RIM back to the original trial judge for review, putting cold water on a near-term settlement.
Kodak announced that it was exploring “strategic alternatives” for its digital imaging patents on July 20. Kodak’s 1,100 digital imaging patents make up 10% of its total U.S. patent portfolio. Laura Quatela, Kodak’s general counsel and senior vice president, said in a statement that “trends in the marketplace for intellectual property” made it the right time to look at opportunities.
Kodak has a stronger patent position in the digital imaging fields than its Asian competitors Panasonic, Ricoh, and Canon, as well as U.S. competitors H-P, according to intellectual property data provider Innography. Kodak, or Lazard Ltd, the financial advisory marketing its portfolio, would not comment on the latest news.
FWIW P&F Ascending Triple Top Breakout - Price Target $95
They're buying a major piece of 'Beats' the headphone manufacturer.
Pegatron to begin shipments of iPhone 5 in September
Pegatron Technology has landed orders for 10 million units of iPhone 5 to become the second ODM of the smartphone. Shipments will start in September, according to industry sources.
Exclusive: Nokia to Exit Symbian, Low-End Phone Businesses in North America
AUGUST 9, 2011 AT 10:25 AM PT
Nokia plans to stop selling both feature phones and Symbian-based smartphones in the United States and Canada as it tries to put all of its muscle behind the company’s huge bet on Windows Phone.
In an interview with AllThingsD, the head of Nokia’s U.S. subsidiary said that the company will also focus exclusively on sales through traditional wireless carriers. In the past, Nokia has sold its smartphones at full price to consumers, after finding carriers unwilling to significantly subsidize or market the products. It has also had a significant — if low margin — business selling low-cost feature phones.
However, Nokia says it needs to put all of its efforts into its Windows Phone products, which are due out later this year.
“When we launch Windows Phones we will essentially be out of the Symbian business, the S40 business, etc., ” Nokia Inc. President Chris Weber said in an interview. “It will be Windows Phone and the accessories around that. The reality is if we are not successful with Windows Phone, it doesn’t matter what we do (elsewhere).”
North America is a priority for Nokia, Weber said, in part because it is a key market for Microsoft and also because Nokia sees it as a key to winning in the smartphone battle globally.
“We’ll develop for North America and make the phones globally available and applicable,” Weber said. “In fact, evidence of that is that the first Windows Phones that will ship are being done by our group in San Diego.”
Nokia plans its biggest-ever marketing push focused on reestablishing its presence in the U.S.
“Without getting into numbers, it is significantly larger than anything we have done in the past and the most we will invest in any market worldwide,” Weber said. “They are putting their money where their mouth is.”
T-Mobile did start selling a Symbian smartphone earlier this year — the Nokia Astound — but it’s launch came after Nokia had already announced its move to Windows Phone and sales have been disappointing, Nokia Weber confirmed.
The moves are part of a series of changes that Nokia has made since Weber assumed the top U.S. post in February. Like Nokia CEO Stephen Elop, Weber came from Microsoft, where he most recently headed enterprise sales.
As part of the shift, Nokia also said it has no current plans to bring its lone Meego-based phone, the Nokia N9, to the U.S., a fact reported earlier Tuesday by Engadget.
The company is moving its sales force to Sunnyvale, and Weber told AllThingsD that the company also aims to consolidate more of its operations in Sunnyvale, shifting away work now done in other facilities in White Plains, N.Y., and Dallas. Those changes are expected to be made by early next year.
Arima Communications handset shipments increase in July
Commercial Times, August 9; Steve Shen, DIGITIMES [Tuesday 9 August 2011]
Arima Communications shipped 2.26 million handsets in July compared to 2.21 million units shipped in June, according to a Chinese-language Commercial Times report.
For the third quarter of 2011, Arima's handset shipments are expected to reach 6.6-6.9 million units, increasing 19-23% from the second quarter, the paper quoted the company as saying.
Meanwhile, Arima saw its consolidated revenues surge 67% on year to NT$2.79 billion (US$96.12 million) in July. For the January-July period, revenues totaled NT$15.05 billion, increasing 90.6% from a year earlier, according to a company filing with the Taiwan Stock Exchange (TSE).
HTC July sales up 83% on year, announcing acquisition of Dashwire
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Press release; Steve Shen, DIGITIMES [Friday 5 August 2011]
HTC has announces consolidated revenues of NT$45.11 billion (US$1.56 billion) for July, up 83.29% on year, while total revenues from January to July 2011 were NT$273.67 billion, up 121.56% from a year earlier.
HTC also announced the acquisition of Seattle-based Dashwire, the maker of the Dashworks platform that provides mobile and web applications, enabling people to setup and personalize their smartphones, and access their mobile content across multiple screens and services. Dashwire will become a wholly-owned subsidiary of HTC.
"Cloud services are key to delivering the promise of connected services to our customers," said Fred Liu, president of engineering and operations at HTC. "People want access to all of their important content wherever they are on any device. The addition of Dashwire's cutting-edge sync services and deep mobile cloud experience strengthens our ability to deliver these services in a more powerful way."
HTC will utilize Dashwire's cloud sync and device set up products to extend the HTCSense.com cloud services it launched in 2010, the company said.
Everyone please say Good Bye to our old friend:
ITC Judge in Kodak-Apple Patent Spat Retires
Published on August 4, 2011
by John Paczkowski
The patent infringement case Kodak brought against Apple and Research In Motion with the International Trade Commission may drag on longer than expected, now that the judge presiding over it has retired. ITC Chief Administrative Law Judge Paul Luckern, who ruled in January that Apple’s and RIM’s smartphones don’t infringe on Kodak’s image-preview patents, stepped down on Wednesday, leaving that case to be reassigned to other judges. Unfortunate for Kodak and everyone else involved, as Luckern was expected to issue a decision in the case by the end of this month.
Pegatron to begin shipments of iPhone 5 in September
Monica Chen, Taipei; Adam Hwang, DIGITIMES [Wednesday 3 August 2011]
Pegatron Technology has landed orders for 10 million units of iPhone 5 to become the second ODM of the smartphone. Shipments will start in September, according to industry sources.
As iPhone gross margins are relatively small, Pegatron aims to compete for orders for iPad, MacBook Air and other Apple products and has increased production equipment and employment, the sources said.
For 2012, Pegatron expects to obtain ODM orders for 8-10 million notebooks form Acer, the sources noted.
HTC Sales Continue Steep Upward Trend
Published on July 29, 2011
by Ina Fried
Taiwanese cellphone maker HTC issued another upbeat earnings report on Friday, as second-quarter profit and revenue more than doubled from a year earlier.
The company said it earned 17.52 billion Taiwanese dollars (US $606.7 million) on revenue of NT$124.4 billion ($4.3 billion) in the quarter. Unit shipments of 12.1 million were up 123.7 percent from a year ago and almost 25 percent from an already strong first quarter.
“Consumer reactions to our award-winning designs have driven us to another record-breaking quarter,” HTC CEO Peter Chou said in a statement. “Our teams work so hard to create each individual experience on the device, and it is gratifying for all of us to see them embraced at the volume levels we are consistently reporting across the globe.”
Average selling prices ticked up 2.6 percent from year-ago levels, to $349. The average selling prices did dip a bit from the prior quarter as the company introduced several lower-priced Android smartphones, including its Facebook-centric ChaCha and Salsa phones, as well as the Wildfire S.
For the third quarter, the company said to expect shipments of about 13.5 million units with revenue of around NT$137 billion, up 10 percent from the prior quarter and 80 percent from last year’s third quarter.
Nortel Patent Probe Picks Up
By THOMAS CATAN
WASHINGTON—The Justice Department is intensifying an investigation into whether tech giants including Apple Inc., Microsoft Corp. and Research in Motion Ltd. could use a recently acquired trove of patents to unfairly hobble competing smartphones using Google Inc.'s Android software, according to people familiar with the matter.
A consortium of six companies last month paid $4.5 billion to acquire a portfolio of 6,000 patents auctioned by the bankrupt Canadian telecom equipment maker Nortel Networks Corp., thwarting Google's interest.
The final amount, five times Google's original $900 million "stalking horse" bid, stunned observers and raised concerns about how the consortium intended to use them.
The Justice Department is interviewing consortium members on whether they have plans to file patent infringement suits against handset makers using Google's Android software, those people said. They are also talking to others that could be adversely affected.
The deal closed on Friday but Justice could still impose conditions on the parties. In April, the department forced a consortium of companies including Microsoft, Apple and Oracle Corp. to promise not to use a portfolio of patents it had acquired to unfairly hurt rivals. Microsoft was forced to give up the patents it was buying and license them instead.
On Friday, Google confirmed that it purchased a number of patents from International Business Machines Corp. related to memory and microprocessor chips, computer architecture and online search engines. A spokesman declined to comment on the price paid.
Nortel held patents touching many parts of the modern tech landscape. But it attracted particular interest from mobile telephone and computing companies because of rare patents relating to wireless technology.
For example, it included patents on the fourth-generation mobile networks now being rolled out in the U.S. and elsewhere, called Long Term Evolution, and on Wi-Fi wireless networking.
The winning consortium, which calls itself Rockstar Bidco, hasn't said what it intends to do with the patents. It is unclear whether it intends to keep the patents centrally or divide them up among its members. The Justice Department wants to know whether it intends to use them defensively to deter patent lawsuits against its members, or offensively against rivals.
But Android supporters say that the six would never have paid so much if they merely wanted the patents to protect themselves against lawsuits. Microsoft, for example, already had a license to use the patents, so it wouldn't face any law suits whoever owned them.
A key question for the Justice Department is likely "whether there's an agreement, implicit or explicit, among the members of the Rockstar consortium to collectively hinder the adoption of Android," said Thomas Ensign, an antitrust lawyer at Freshfields Bruckhaus Deringer LLP in Washington who isn't involved in the investigation.
A Justice Department spokeswoman declined to comment on the investigation, which hasn't been announced, as did spokesmen for Apple, Microsoft and Google.
Google has previously said it believes the consortium intends to use the patents to block it and others from bringing new products to market.
The bid was "a sign of companies coming together not to buy new technology, not to buy great engineers or great products, but to buy the legal right to stop other people from innovating," Google's general counsel, Kent Walker, said on Bloomberg TV this week.
Google is particularly vulnerable to patent infringement suits. Its size and wealth give it plenty to lose if anyone were to secure a court injunction against one of its key technologies. But it is only 12-years-old and has relatively few patents with which to deter suits by competitors.
The Mountain View, Calif., firm has already come under attack. Apple sued a number of handset makers using Android, including HTC Corp. and Samsung and Motorola. Apple also has been on the receiving end of such suits, recently settling a case brought by Nokia Corp.Google had hoped to bolster its armory with Nortel's patents. But, despite teaming up with chipmaker Intel Corp., the bidding quickly soared beyond its reach when Apple joined the Rockstar consortium. Other members included Sony Corp. and Telefon AB L.M. Ericsson.
The Justice Department had given all bidders in the Nortel auction preliminary antitrust clearance, partly because it didn't wish to affect the outcome of the auction, the people said. But the agency made clear to the parties that it didn't give up the right to take a fresh look if it believed the winning offer presented competitive concerns, they said.
The fact that Apple joined the Rockstar consortium and the bidding rose so high gave the agency cause to look at the issues anew, they said.
Even if Rockstar's deal is allowed by the Justice Department, some question whether it, or its principal members, would be able to bid on patent portfolios in the future without triggering an antitrust challenge.
"We're seeing a situation where big companies seem more willing to try to use, and in essence misuse, their patent portfolio in a really aggressive way to go after open-source products and weaker competitors," said Ed Black, president of the Computer & Communications Industry Association, a tech lobbying group. "That's really troubling."
Read more: http://online.wsj.com/article/SB10001424053111903635604576476430510833852.html#ixzz1TXGCIOgG
The simple answer is we had a poison pill and a staggered Board. We were not buyable below $250/share.
Apple Doubling Down on Manufacturers for iPad 3?
JULY 29, 2011 AT 3:00 AM PT
Apple’s diversifying its supply chain in advance of some big fall product launches. Industry sources tell Taiwan Economic News that the company may soon tap Pegatron to manufacture the iPad 3, alongside longtime iOS device partner Foxconn.
“Industry insiders believe that Pegatron has a good chance to win this [iPad] business, because of its integrated production network specifically for the production of tablet PCs,” the publication explains. “Already, the company has produced three or four different models of tablet PCs and e-book readers for several globally prominent customers, including Asus and Toshiba. Further, the increasingly close partnership that Pegatron has built up with Apple after a year of cooperation in the production of the iPhone`s CDMA edition will also encourage Apple to place orders with Pegatron for the iPad 3.”
Not an entirely unexpected move as Apple had been rumored to be considering lining up additional manufacturing partners in the hopes of tempering the supply constraints that have plagued iPad launches in the past. As Apple COO Tim Cook said during the company’s recent earnings call, “We sold every iPad 2 we could make this quarter. There is no shortage of demand.”
Presumably, adding a second manufacturing partner would increase supply, allowing Apple to satisfy that demand, driving its profits even higher. And an arrangement like this will also go a long way toward mitigating the company’s vulnerability to supply chain disruptions, whether they be caused by natural disasters or tragic industrial accidents.
Deal-Making Lifts Lazard and Evercore
BY MICHAEL J. DE LA MERCED AND KEVIN ROOSE
Lazard said on Thursday that its second-quarter profit rose 23 percent from the period a year ago as increasing deal activity and growth in assets under management bolstered results, the investment bank said on Thursday.
Another investment bank, Evercore Partners, reported on Thursday a 119 percent gain in second-quarter revenue, to $142 million.
The results of both banks highlighted the improved market in deal-making, as companies seek growth through transactions such as mergers and asset sales.
Lazard’s chief financial officer, Matthieu Bucaille, said in an interview, “In uncertain or uneven environments, our business model does well, because people are looking for independent advice.”
Lazard reported net income of $65.8 million on a fully exchanged basis and core operating revenue of $486.9 million. Still, the 48-cents-a-share profit fell 1 cent below the average estimate of analysts surveyed by Thomson Reuters.
Its core mergers business reported a 17 percent rise in operating revenue, to $170.6 million for the quarter. Among the deals it worked on that closed in the quarter — important since banks generally earn fees when a transaction is completed — were the Mosaic Company’s spinoff from Cargill and Vodafone’s sale of its $11.3 billion stake in SFR of France.
The firm is also advising on pending transactions such as Medco’s $29 billion sale to Express Scripts, and is advising the Greek government in its debt negotiations.
As expected, Lazard’s restructuring business continued to decline, as fewer companies filed for bankruptcy protection. The unit’s revenue fell 40 percent, to $48.3 million.
Revenue at the firm’s asset management business, which is meant to smooth over the lumpiness of Lazard’s mergers unit, jumped 27 percent, to $237.7 million.
Lazard’s compensation ratio fell to 58.1 percent for the quarter from 59.8 percent in the year-earlier period. Mr. Bucaille said that the firm was maintaining a “laser focus” on keeping expenses contained, even as it hired several prominent executives this year.
Evercore has also made a number of hires. But adding experienced employees meant paying them well, and the firm gave out $101 million, or 71 percent of its revenue, as compensation this quarter, up from 70 percent in the period a year earlier.
Using adjusted pro forma numbers, Evercore had a quarterly profit of $17.8 million, or 43 cents a share, on revenue of $141 million. The adjusted earnings were slightly below analysts’ expectations.
Falcone’s LightSquared Agrees With Sprint Over 15-Year Network Expansion
By Devin Banerjee - Jul 28, 2011
Billionaire Philip Falcone’s LightSquared Inc. struck a 15-year deal with Sprint Nextel Corp. (S) to share network expansion costs and equipment in an effort aimed at making both stronger wireless competitors.
LightSquared will pay Sprint to build and operate a nationwide wireless network that uses high-speed long-term evolution, or LTE, technology, the companies said in a statement today. During an 11-year period, LightSquared will pay Sprint $9 billion in cash and credits valued at about $4.5 billion. Sprint can use the credits to acquire capacity from LightSquared, which plans to offer wholesale wireless service to consumer electronics companies and other telecommunications operators.
“This agreement gives LightSquared a rapid and cost- effective radio-access network build,” Sanjiv Ahuja, chairman and chief executive officer of LightSquared, said in the statement. “LightSquared is now well positioned to meet the fast-growing market demand for wireless broadband services.”
The deal has potential advantages for LightSquared and Sprint as they attempt to challenge Verizon Wireless and AT&T Inc. (T), the two largest U.S. wireless operators. For LightSquared, the agreement is a way to build out its planned national network at lower costs. For Sprint, the deal will provide a new source of revenue as the third-largest U.S. wireless company struggles to compete with bigger rivals.
AT&T is trying to acquire Deutsche Telekom AG (DTE)’s T-Mobile USA unit, which would let it pass Verizon Wireless to become the country’s No. 1 wireless operator and leave Sprint farther behind. Sprint Chief Executive Officer Dan Hesse is fighting to block the deal, which needs government approval, arguing it would stifle competition.
Rising Data Demand
Sprint has already pledged $5 billion to upgrade its network over the next three to five years. The company can use LightSquared’s network to lessen the load on its own network as data demand skyrockets, an issue that has plagued other carriers.
Hesse said in May that Sprint was in talks with Clearwire Corp. (CLWR) for a similar network deal. Kirkland, Washington-based Clearwire provides Sprint’s fourth-generation wireless service.
LightSquared, backed by Falcone’s Harbinger Capital Partners hedge fund, has drawn questions from the Federal Communications Commission and the Federal Aviation Administration over concerns it may interfere with global- positioning systems. The company may cost 794 lives in aviation accidents over 10 years as it disrupts satellite-aided navigation and at least $70 billion as aircraft owners forgo the advantages of using GPS and purchase new equipment, the FAA said in a study this month.
The study “discusses a LightSquared plan that is no longer on the table,” Jeff Carlisle, executive vice president of regulatory affairs for Reston, Virginia-based LightSquared, said in an e-mail. “The vast majority of the interference issues raised by this report are no longer an issue.”
Apple: Formidable Bidder For Any IP Trove, Says Barclays
Posted by Tiernan Ray
In case you missed it, Apple (AAPL) last week filed its 10-Q for the fiscal Q3 that ended in June, and that the company reported last Tuesday.
Barclays Capital’s Ben Reitzes the other day weighed in with observation regarding that filing: Apple paid $2.6 billion to Nortel Networks as its share of the $.4.5 billion collective bid for the Nortel telecom patents, which Apple is buying along with EMC (EMC), Microsoft (MSFT), Ericsson (ERIC), Sony (SNE) and Research in Motion (RIMM).
(Reitzes’s note is actually dated Monday, July 25th, so my apologies to getting to this belatedly.)
Following that train of thought, Reitzes remarks, “With the Nortel sale, other companies are also examining wireless IP sales including InterDigital (IDCC) and Eastman Kodak (EK). We expect Apple to be involved in many of these discussions. With a cash balance of over $76B, the company would be a formidable bidder for any IP it covets.”
I would note that InterDigital reports earnings this afternoon. It should be interesting to see if they have anything further to say on the matter of monetizing their patents.
Apple shares today are down $4.71, or 1.2%, at $398.70.
Nokia’s Debt Rating Cut to Two Steps Above Junk
By Diana ben-Aaron - Jul 27, 2011
Nokia Oyj (NOK1V), the world’s biggest maker of mobile phones, had its debt rating cut to two steps above junk by Moody’s Investors Service, which cited “a severe weakening” of the Finnish company’s market position.
The senior debt rating was reduced by two steps to Baa2, the second-lowest among 10 investment-grade rankings, with a negative outlook, Moody’s said in a statement today announcing its second downgrade of Nokia in four months. The change affects about 3.5 billion euros ($5.1 billion) in senior debt.
“This deterioration has been caused by a loss of competitiveness of Nokia’s Symbian-based smartphone portfolio and the transition of its operating systems to the Windows Phone platform,” Moody’s analyst Wolfgang Draack said in the statement, which also cited “increasing price pressure and gaps in the company’s mobile-phone portfolio that are now being filled.”
The company’s handset shipments declined 20 percent to 88.5 million in the second quarter, the lowest quarterly volume in five years, as it fixed inventory problems and struggled to roll out new models. Espoo, Finland-based Nokia may also have to contribute additional capital or funding to its phone-equipment venture with Siemens AG, Moody’s said.
“Because of intense price pressure, Nokia Siemens Networks is generating neither material profits nor cash flows,” Draack wrote, adding that Nokia Siemens may have trouble refinancing its 2 billion-euro revolving credit agreement before maturity in June 2012 if it doesn’t have help.
Second-Quarter Loss
Nokia this month reported a wider-than-expected second- quarter net loss of 368 million euros as handset sales in Europe and China slid. The company is facing stiff competition as smartphones using Google Inc. (GOOG)’s Android software eat into its mid-range feature-phone sales as well as the high end. Nokia Chief Executive Officer Stephen Elop is transferring Symbian software development to Accenture Plc as the Symbian phone lines are gradually displaced by new models based on Microsoft Corp. (MSFT)’s Windows Phone.
“Moody’s rating action will not have a material impact on our current financing costs,” Nokia spokesman Doug Dawson said in a statement. He reiterated Elop’s target of increasing the company’s net cash and other liquid assets by the end of the year from 3.9 billion euros at the end of the second quarter.
Bond Yield
The extra yield investors demand to hold the company’s 6.75 percent bonds due 2019 rather than government debt spiked after the company said on May 31 its adjusted second-quarter handset operating margin could be “around breakeven.” That margin was 10.9 percent for the full year 2010. The cost of insuring Nokia debt soared to a peak of 291 basis points July 20, the day before Nokia reported earnings, from 120 basis points May 30, according to CMA prices for credit-default swaps.
The first Windows Phones are expected to ship in the fourth quarter, followed by a broader range next year. Elop announced a program of job cuts in April.
FROM CHINA MEDIA:
Sued Huawei, ZTE Corporation InterDigital patent infringement
Source: Fenghuang Wang at 07:43 on July 27 2011
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Phoenix network technology FRANCISCO, July 27, according to Reuters, the wireless company InterDigital patents on Tuesday to the United States International Trade Commission (ITC) filed suit against Nokia, Huawei and ZTE cell phone patent infringement 7.
InterDigital request ITC banned the sale of three companies in the United States, including mobile phones and tablet PCs, including the infringing products. In addition, InterDigital also to the United States District Court for Delaware has submitted a petition, the three companies launched the same litigation. InterDigital said, ITC complaint must be received within 30 days to decide whether a formal investigation.
Huawei spokesman ????? (Bill Plummer) said that Huawei has not seen InterDigital's indictment, but Huawei's cross-patent licensing and patent agreements are confident that Huawei will be strong to defend themselves.
Plummer said: "In the wireless industry, cross-patent licensing and patent agreements is normal business, in view of recent news reports about InterDigital, it is difficult to see what the motivation here."
Nokia spokesman Mark Durant (Mark Durrant), Nokia will take all possible measures to protect their interests. ZTE declined to immediately comment. (Build / Yi-hui)
Google General Counsel Says Smartphone Patents Are ‘Gumming Up’ Innovation
By Susan Decker - Jul 25, 2011
Google Inc. (GOOG) General Counsel Kent Walker said the smartphone industry is using patents in an arms race that hurts consumers, leaving the company trying to “sort through the mess” of litigation.
“It’s hard to find what’s the best path -- there’s so much litigation,” Walker said in an interview. “We’re exploring a variety of different things.”
Google is seeking to buy patents that would put it on a level plane with its rivals, and the company will continue to push to have the U.S. Patent and Trademark Office take a closer look at issued patents that are being used in litigation, Walker said. Congress and the Federal Trade Commission also need to do more to rein in software patents and lawsuits, he said.
“The tech industry has a significant problem there,” Walker said. “Software patents are kind of gumming up the works of innovation.”
He also said the Mountain View, California-based company is providing support and technical help to companies that make products for the Android operating system and are being sued, either by rival companies such as Apple Inc. and Microsoft Corp., or by small patent owners that don’t make products.
InterDigital shares jump 29%; board exploring sale
NEW YORK (MarketWatch) -- InterDigital Inc. IDCC +25.83% shares rose 29% in pre-market trading on Tuesday morning after the board of directors said that the wireless technology development company was exploring a possible sale. Terry Clontz, chairman of InterDigital's board of directors said that the value of intellectual property in the mobile industry had risen "substantially" in the past year, making it an appropriate time to explore strategic options.
Google Searching for Patents After Nortel Loss
By Susan Decker - BLOOMBERG Jul 5, 2011
Google Inc. (GOOG)’s loss in bidding for the $4.5 billion portfolio of Nortel Networks Corp. patents last week means the Internet-search company will be looking to buy other inventions to build a bulwark against lawsuits targeting its Android system, patent brokers said.
“There are a lot of phenomenal portfolios for sale,” said Dean Becker, chief executive officer of ICAP Patent Brokerage in Palm Beach, Florida, the world’s largest patent seller. “Every operating company is in the market because of the expense, distraction and the potential financial risk of patent litigation.”
Google, with $36.7 billion in cash and securities as of March, is ramping up efforts to obtain patents to create what it calls a disincentive for companies to sue amid “an explosion” in litigation. Last week’s Nortel auction, the biggest of its kind, followed Google’s $900 million offer in April to buy the more than 6,000 patents owned by the Canadian phone-equipment maker that filed for bankruptcy protection in 2009.
While Google took itself out of the running as bidding prices rose, the company will keep searching for opportunities, mainly for patents related to smartphone technology, said Ron Epstein of Epicenter IP Group LLC, a Redwood City, California- based patent brokerage not involved in the auction.
“Assuming they were willing to spend at least the $900 million of their initial offer to achieve the result they were after, they’re going to get there,” Epstein said in an interview. The Nortel portfolio was viewed as “a unique asset that could never be repeated. That’s just not true,” he said.
Oracle, Apple Lawsuits
Winning the Nortel portfolio, which went to a group led by Cupertino, California-based Apple Inc. (AAPL), would have boosted Google’s patent holdings almost ninefold from at least 701 today, according to U.S. Patent & Trademark Office records. The increase would have given Mountain View, California-based Google more ammunition against lawsuits, which have increased since the world’s largest Internet-search company moved into areas such as mobile and desktop operating systems to broaden sales.
Oracle Corp. (ORCL) has sued Google directly, and Apple has gone after makers of phones that use Google’s Android mobile operating system, including HTC Corp. (2498) and Samsung Electronics Co. Microsoft Corp. (MSFT) also has demanded licensing revenue from makers of products that run on Android, and has filed a trade complaint seeking to block U.S. imports of Barnes & Noble Inc.’s Android-based Nook reader.
The Android system introduced in 2007 is an open source program that relies on some nonproprietary features Google didn’t create and allows outside developers to modify the code.
Best Defense
“They find that, as you enter markets where there are other smart people spending lots of R&D dollars, you are going to use other people’s innovations,” Epstein said. “When it comes to buying access to the innovations, you need a coin to trade for that. They find that, ‘Damn, I’m going to have to obtain my own portfolio, so I can engage in the innovation negotiation market.’”
While the company wouldn’t comment for this story, Google executives have criticized the challenges of patent lawsuits.
In an April 4 blog posting, Google General Counsel Kent Walker described “an explosion of patent litigation, often involving low-quality software patents” and said the Nortel bid was going to discourage lawsuits against Google.
“One of a company’s best defenses against this kind of litigation is (ironically) to have a formidable patent portfolio,” Walker said in the blog post.
In a July 1 e-mail he called the announcement of Google being outbid “disappointing for anyone who believes that open innovation benefits users and promotes creativity and competition.”
‘Questionable Patents’
The winning group included some Apple competitors-turned- partners: Microsoft, Research In Motion Ltd. (RIM), Sony Corp. (6758), Ericsson AB and EMC Corp., according to a Nortel statement.
In Oracle’s patent- and copyright-infringement lawsuit in federal court in San Francisco, the enterprise-software company claims Google copied technology related to the Java programming language and is seeking as much as $6.1 billion. Separately, Skyhook Wireless Inc., which makes location-finding software for the iPhone and other mobile devices, has accused Google of interfering with Skyhook contracts and infringing its patents.
Google hasn’t filed any countersuits against Oracle or Skyhook. Instead it’s basing its defenses mainly on challenging the patents or denying infringement. The company has also urged changes through court filings and by lobbying Congress to make it easier to challenge patents.
“Questionable patents do not foster innovation,” Google wrote in a February filing on behalf of Microsoft’s failed bid to make it easier to invalidate patents at trial. “Instead, they block and impair others from innovating.”
Buying Patents
Google has increased its patent portfolio as well, receiving as many as 282 patents last year, up from 3 in 2004, according to a search of the U.S. Patent & Trademark Office’s database. It’s received 141 so far this year as of the June 28.
The number of Google patents obtained in 2010 was about half of the 563 Apple received last year, and a fraction of Microsoft’s 3,121, according to figures compiled by the Intellectual Property Owners Association.
In all, 701 patents have been assigned to Google over the years, with the most recent one for “detecting and rejecting annoying documents.” Another from March is for Google Doodles, which alters the name of the company to match a day’s theme.
Google is typical of young technology companies that, early on, try to avoid patents only to find they can’t compete effectively without them, Epstein said. The company is often compared with Microsoft, which 10 years ago ranked 44th among companies receiving U.S. patents, and has been No. 3, behind International Business Machines Corp. and Samsung, for the past two years.
Google has “the same arrogance that Microsoft had,” said Ron Laurie, managing director of Inflexion Point Strategy LLC in Palo Alto, California, which counsels companies on purchasing intellectual property. “They had this combination of thinking patents were from the devil, while they were on a mission from God. After getting attacked so often, they started getting it.”
Pegatron receives orders for 15 million iPhone 5s from Apple
Monica Chen, Taipei; Joseph Tsai, DIGITIMES [Tuesday 5 July 2011]
Taiwan-based notebook maker Pegatron Technology is estimated to have landed orders for 15 million iPhone 5s (iPhone 4S) from Apple and is set to start shipping in September of 2011, according to sources from upstream component makers. In response, Pegatron declined to comment about its cooperation with clients.
Due to its cooperation with Apple for iPhone 4, Pegatron, in 2010, significantly expanded its plants, human power and equipment aiming satisfy the orders for 10 million CDMA iPhone 4s; however, since the Apple's CDMA iPhone 4 sales were lower than expected in the first quarter of 2011, Pegatron shipped less than four million CDMA iPhone 4s, causing the company's utilization rate to drop to only 50% with its gross margin also drop to 1.8% in the quarter.
The sources pointed out that as the iPhone 5, which does not seem to have any major update from iPhone 4, is already set for shipment in September, they are already started supplying components to Pegatron with Pegatron's plants in Shanghai, China also recently started hiring for manpower.
In addition to the iPhone, Pegatron has also been aggressive striving for iPad or Macbook orders from Apple, but due to the products' existing makers are defending their orders, Pegatron currently still has not yet achieved any progress. However, under the consideration of separating risks, some market watchers believe Pegatron will have chance to land a small volume of iPad orders in 2012.
Losing notebook orders from its major client Asustek Computer, Pegatron is currently working aggressively to land notebook orders from Acer with market watchers estimated that Pegatron will be able to land orders for more than six million notebooks in the second half of 2012, up from the two million units, currently.
As for dropping PS3 shipments, Although Sony already released information about PS4, the sources is still conservative about the new gaming console's shipments as the gaming market has recently been impacted strongly by online devices such as tablet PCs.
HTC Quarterly Sales Beat Estimates, Says Growth to Continue; Shares Gain
By Tim Culpan - Jul 4, 2011
HTC Corp. (2498), Asia’s second-largest smartphone maker, posted sales that beat analysts’ estimates for a third quarter and said growth will continue as demand in the U.S. and Asia remain strong. Shares rose in Taipei trading.
Second-quarter revenue was NT$124.4 billion ($4.3 billion) and shipments met the company’s 11 million-unit target, Winston Yung, chief financial officer of the Taoyuan, Taiwan-based company, said by phone today. Sales more than doubled from a year earlier, and surpassed the NT$118.9 billion average of 20 analysts’ estimates compiled by Bloomberg.
Strong demand in the U.S. and Asia last quarter offset a slowdown in Europe, Yung said. HTC released its Sensation handset last month with a wide viewing angle and high-definition video camera as it seeks to lure consumers away from Apple Inc. (AAPL)’s iPhone and Samsung Electronics Co.’s Galaxy handsets.
“If you look at the overall number, it’s driven by the U.S., but if you look at the growth rate, the growth rate of Asia has been particularly high,” Yung said. “We are very confident. I think we have launched a few products which will drive momentum all over the world and have high expectations for Sensation.”
Second-quarter earnings will be announced July 6, Yung said. He declined to give sales or shipments forecasts.
‘Buy’ Ratings
HTC added 4.5 percent to NT$1,055 at the 1:30 p.m. close of trade in Taipei today, the highest level in a week. The stock has climbed 17 percent this year and is down from a record-high close of NT$1,300 on April 28.
The shares lost 21 percent in June, the largest monthly drop in almost two years, as analysts including Macquarie Group Ltd.’s Daniel Chang cut their recommendations, citing slowing sales growth amid strong competition from rivals.
Twenty-six of 36 analysts surveyed by Bloomberg advise investors to “buy” the stock, nine say “hold” and one has a “sell” rating.
“The market’s overall view of the second half had been toned down, and everyone expected HTC’s growth momentum to slow in the third quarter,” said Bonnie Chang, who recommends investors “buy” the stock at Yuanta Financial Holding Co. in Taipei.
HTC, the first company to produce a handset using Google Inc. (GOOG)’s Android platform, has posted year-on-year sales growth that surpassed 100 percent each quarter since the three months to Sept. 30, according to Bloomberg data.
Yung declined to comment on actual shipments or HTC’s profit margins. On April 29, the company forecast gross margin, a measure of profitability that tracks sales less the cost of goods sold, of 28.5 percent to 29.5 percent for the second quarter, compared with 29.3 percent in the preceding three-month period.
To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.
Patent-Overhaul Bill Clears House
By AMY SCHATZ
WASHINGTON—House lawmakers passed legislation Thursday to overhaul the U.S. patent system for the first time in nearly 60 years, despite disagreements over patent-office funding and a provision that could help large banks challenge some patents.
The House passed the America Invents Act on a 304-117 vote, a bipartisan tally with more than two-thirds of lawmakers from each party supporting the bill. The bill would change how the U.S. grants patents and award them to the party which is "first to file" an invention instead of the "first to invent" it. The change would bring the U.S. in line with other countries who adopted first to file patent systems years ago, a move that will simplify the patent process for companies that file applications in multiple countries.
The Senate passed similar legislation in March on a 95-to-5 vote. The House and Senate must now negotiate a final bill before patent overhaul can be sent to President Barack Obama to be signed into law.
The bill's supporters say it will improve patent quality by creating a new process for reviewing patents after they have been issued and allow third parties to provide information on other parties' applications. In a nod to university concerns, the bill would also give inventors a grace period to file for patents after publicly disclosing their inventions. It would also stop the ability of inventors to receive patents on tax strategies.
"This bill is designed to help all inventors," said Rep. Lamar Smith (R., Texas), who chairs the House Judiciary Committee and helped author the legislation. The current system "seriously disadvantages small inventors and companies" because it can lead to years of costly legal challenges to their patents, he said.
Congress has been trying to overhaul U.S. patent rules for more than a decade, but previous efforts to reach a compromise on new rules fell apart amid squabbling by various industries, including pharmaceutical and Silicon Valley companies. Many of the most divisive issues have been settled by the courts in recent years, however, leading to the current legislation.
The banking industry scored a victory when lawmakers included a provision in the bill which would make it easier for banks to get re-examination of patents on financial business processes such as check-scanning, in an effort to avoid paying patent-infringement fees. The U.S. Chamber of Commerce and the National Retail Federation joined the banking industry to push for the provision, which was opposed by some small inventors.
An amendment sponsored by six lawmakers to strip that provision from the bill failed. The banking industry measure is also in the Senate version of the bill.
Even though the legislation enjoyed broad industry support and was relatively uncontroversial, the House bill ended up filled with some thorny provisions that riled a few industry groups.
Some inventors and small businesses complained that switching to a "first to file" system would give large companies an advantage and hurt individual inventors. Opponents argued there is no reason to change the U.S. system. "Our patent system is the strongest in the world," said Rep. James Sensenbrenner (R., Wis.), whose effort to kill the "first to file" change failed.
Rep. John Conyers (D., Mich.), another opponent, said the legislation would "benefit large multinationals at the expense of independent inventors and small businesses" and would "harm jobs, harm innovation and harm our nation."
The Innovation Alliance, a lobbying group representing some biotech and tech companies including Qualcomm Inc., pulled its support of the legislation Tuesday over a disagreement over how patent office operations are funded.
Corporate America widely supported a funding provision allowing the patent office to keep all of the money it collects. The office runs on the fees it collects, however in the past two decades Congress has diverted upwards of $800 million in patent fees for other programs. Companies and inventors hope that allowing the patent office keep all its fees would help the office speed up its reviews and clear its backlog of more than 700,000 applications.
But in early June House Budget Chairman Paul Ryan (R., Wis.) and Appropriations Chairman Harold Rogers (R., Ky.), complained the legislation would eliminate annual congressional budget oversight of the patent office by giving it automatic use of any fees its raises.
Under a compromise reached earlier this week, House lawmakers agreed to let the agency keep patent fees but would put any funds excess of its annual budget into a reserve account overseen by Congress. The provision conflicts with the Senate's patent bill and the White House expressed concerns about the proposal Tuesday, saying the patent office "must be able to use all the fees it collects to serve the users who pay those fees."
Although the House and Senate bills must now be reconciled, the White House has already signaled its support for the legislation to be signed into law.