LONDON (MarketWatch) -- Nokia Corp. said Tuesday it agreed to settle all patent litigation with Apple Inc., a move that's expected to have a positive impact on the Finnish firm's recently lowered second-quarter outlook.
The news buoyed the shares of the mobile-phone maker, which has struggled to stay competitive, particularly in the lucrative smartphone market.
The agreement includes Nokia and Apple (AAPL) withdrawing their complaints to the U.S. International Trade Commission.
The deal consists of "a one-time payment payable by Apple and ongoing royalties to be paid by Apple to Nokia for the term of the agreement," Nokia said.
The specific terms of the contract were not disclosed.
"Apple and Nokia have agreed to drop all of our current lawsuits and enter into a license covering some of each others' patents, but not the majority of the innovations that make the iPhone unique," a spokesperson for Apple told MarketWatch. "We're glad to put this behind us and get back to focusing on our respective businesses."
Nokia's shares (NOK) rose 2.7% in Helsinki afternoon trading. They have slumped 43% so far this year.
U.S.-listed shares of Nokia gained 4.5% and Apple's shares rose 1.6% in early U.S. trading.
"I think it is a surprise to the market. Most people were expecting they would end up with a cross-licensing agreement where both sides pay," said Tero Kuittinen, senior analyst at MKM Partners. "It's an acknowledgment that Nokia's patent portfolio is strong."
"I am assuming that the one-time fee is at least half a billion euros and I am assuming that the licensing fee would be probably 4 euros per iPhone," he said.
Geoff Blaber, senior analyst at U.K.-based consultancy CCS Insight, said the agreement is a "hugely positive development for Nokia, allowing it to focus on its core business at a time when it's facing considerable challenges and can little afford the distraction of protracted litigation."
Nokia said Tuesday that the agreement with Apple is expected to have a "positive financial impact" on the recently revised second-quarter outlook for its adjusted operating margin in devices and services.
On May 31, Nokia's shares tumbled after the firm said its margin will be "substantially below" its previously expected 6% to 9% range and could be around the break-even point.
At the time, Nokia also said it expected net sales in devices and services to be substantially below its previously estimated range of 6.1 billion euros to 6.6 billion euros ($8.8 billion to $9.5 billion) for the second quarter.
"The outlook is grim [for Nokia], but I upgraded it from a sell to neutral," Kuittinen said. "I believe there is a real chance that the share price may rebound, partly because Nokia's patent portfolio has been undervalued by the market."
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