Apple paid $2.6B lion's share of $4.5B Nortel patent acquisition

Posted:
in General Discussion edited January 2014
Apple supplied more than half of the $4.5 billion paid by a consortium of companies to acquire Nortel's patent portfolio, new regulatory filings show.



Apple revealed in its 10-Q filing this week that it paid about $2.6 billion in the Nortel patent sale, analyst Maynard Um with UBS highlighted in a note to investors on Thursday. That's a sum greater than the $2 billion Apple was rumored to have paid shortly after the deal was announced.



Other members of the consortium included Microsoft, Research in Motion, Sony Ericsson, and EMC. In late June, the companies won a bidding war to obtain more than 6,000 patents from Nortel, which filed for bankruptcy in January of 2009.



Previous claims from Reuters suggested that RIM paid $770 million for its share of the patent portfolio, while EMC allegedly contributed $340 million.



The consortium beat out Google, which had established the minimum bid for the auction with a starting offer of $900 million. A number of bidders were interested in the patent trove because of key inventions related to the high-speed long-term evolution 4G wireless standard.



Apple's 10-Q made no mention of the licensing agreement it entered into with rival Nokia in June. That deal includes ongoing royalties in addition to a one-time lump sum payment, both of which remain secret. But evidence in Nokia's quarterly earnings issued on Thursday suggests that Apple's share was no more than $600 million.







Beyond the Nortel patents and Nokia agreement, Um also noted that the 10-Q reveals Apple's warranty accruals were higher than claims for the fourth straight quarter. For the past year, Apple has "overaccrued" claims by about $600 million.



"While we recognize that accruals are for estimated future claims and that claims increased sequentially, we believe the company still has a healthy level of accruals unless claims were to increase significantly," he wrote.



If Apple were to reduce its reserves in the same magnitude it has with $600 million in claims over the past year, Um estimates the company would see a gross margin benefit of 200 basis points.
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Comments

  • Reply 1 of 37
    gatorguygatorguy Posts: 24,213member
    I personally suspect it was sort of a "tag team" agreement. Apple had decided the patents weren't worth more to them than around $2.5B, evidenced by their team building once the figures bid exceeded that. Microsoft had a figure in mind, as did RIM, etc. Once the Goggle bid exceeded the value to Apple, it was time for the next player on the team to step up and contribute. Then the next and the next as needed.
  • Reply 2 of 37
    things are not looking good for Android.



    Google blinks in Oracle patent case, indicates willingness to pay





    http://fosspatents.blogspot.com/2011...tent-case.html
  • Reply 3 of 37
    saareksaarek Posts: 1,523member
    So, If Apple paid the most does that mean that they will benefit the most, or have exclusive rights to some of the patents?



    Seems illogical for them to pay to benefit others in the consortium....
  • Reply 4 of 37
    matrix07matrix07 Posts: 1,993member
    It''s just strange all of these bid against Google. Microsoft, Rim,.. aren't these Apple enemy? I know why but it's strange nonetheless.
  • Reply 5 of 37
    matrix07matrix07 Posts: 1,993member
    Quote:
    Originally Posted by FriedLobster View Post


    things are not looking good for Android.



    Google blinks in Oracle patent case, indicates willingness to pay





    http://fosspatents.blogspot.com/2011...tent-case.html



    Let them pay for every Android activations and see if Google will clarify the definition of it
  • Reply 6 of 37
    mjtomlinmjtomlin Posts: 2,673member
    Quote:
    Originally Posted by saarek View Post


    So, If Apple paid the most does that mean that they will benefit the most, or have exclusive rights to some of the patents?



    Seems illogical for them to pay to benefit others in the consortium....



    The patents are usually split up, and I believe Apple got all the patents relating to LTE.



    Depending on how the deal went down, the members of the consortium may get a free license to use the IP of those patents that they did not outright buy. Any other companies that want to license the IP will have to pay royalties to Apple.



    But, you never really know... anything is possible.
  • Reply 7 of 37
    adamiigsadamiigs Posts: 355member
    There was an article right after they won the patents, some of them were shared, and some were taken by each company, Apple did indeed take the LTE patents.
  • Reply 8 of 37
    applestudapplestud Posts: 367member
    would have been nice if AI bothered to link to the 10-Q



    Here is it, though, for anyone interested



    http://files.shareholder.com/downloa...193/filing.pdf
  • Reply 9 of 37
    gatorguygatorguy Posts: 24,213member
    Thanks AppleStud



    Corroborating links are always helpful.
  • Reply 10 of 37
    addaboxaddabox Posts: 12,665member
    Quote:
    Originally Posted by saarek View Post


    So, If Apple paid the most does that mean that they will benefit the most, or have exclusive rights to some of the patents?



    Seems illogical for them to pay to benefit others in the consortium....



    Google is an unusual competitor. Their only real business is advertising, but since advertising can be appended to almost anything and pays for everything they seem intent on offering free versions of all possible software, while at the same time working with hardware vendors to compete in that arena as well. So they're up against everyone, but with a business model that masks their true ambitions and intentions.



    At the same time, they've proven themselves to be somewhat contemptuous of IP and copyright concerns, using their "free and open" mantra to paint themselves as champions of an egalitarian future while jealously guarding their actual sources of revenue-- the algorithms that undergird their advertising and page ranking business.



    So you end up with an unusually broad coalition of businesses-- content owners, software vendors, online service providers, hardware manufacturers, IP rights holders, networking companies, etc.-- who have a vested interested in limiting the scope of Google's sprawl. Google wants nothing less than each and every digital transaction to pass through their servers, which is to say the entirety of modern life. It's not surprising that the rest of the world might take exception to that, and that stark reality might make for some strange bedfellows.
  • Reply 11 of 37
    gatorguygatorguy Posts: 24,213member
    Quote:
    Originally Posted by addabox View Post


    So you end up with an unusually broad coalition of businesses-- content owners, software vendors, online service providers, hardware manufacturers, IP rights holders, networking companies, etc.-- who have a vested interested in limiting the scope of Google's sprawl. . .



    . . . and that stark reality might make for some strange bedfellows.



    Nice post Addabox
  • Reply 12 of 37
    dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by addabox View Post


    Google wants nothing less than each and every digital transaction to pass through their servers, which is to say the entirety of modern life. It's not surprising that the rest of the world might take exception to that, and that stark reality might make for some strange bedfellows.



    FWIW, not many years ago Microsoft had similar ambitions. I can't say that they didn't worry me at all back then -- far from it -- but the lesson to be learned from Microsoft's failure to deliver, is that ambitions don't necessarily create realties.
  • Reply 13 of 37
    gatorguygatorguy Posts: 24,213member
    Quote:
    Originally Posted by Dr Millmoss View Post


    FWIW, not many years ago Microsoft had similar ambitions. I can't say that they didn't worry me at all back then -- far from it -- but the lesson to be learned from Microsoft's failure to deliver, is that ambitions don't necessarily create realties.



    But they often do create successes too. A failure by someone else doesn't mean you will. Apple knows that.
  • Reply 14 of 37
    addaboxaddabox Posts: 12,665member
    Quote:
    Originally Posted by Dr Millmoss View Post


    FWIW, not many years ago Microsoft had similar ambitions. I can't say that they didn't worry me at all back then -- far from it -- but the lesson to be learned from Microsoft's failure to deliver, is that ambitions don't necessarily create realties.



    True, but I think the combination of internet as totalizing construct and Google's strategy of using advertising as both the means and funding source for insinuating themselves into every aspect of that construct puts them on a different footing than the Microsoft of old. Google is everywhere and nowhere and ostensibly free, with the true cost of their interlocking network of subsidized services and conduits only calculable once it's so entrenched as to be more or less the world itself.



    Doesn't guarantee success, of course, but I don't know if we have historical antecedents for what they're doing that provide a useful roadmap.
  • Reply 15 of 37
    cloudgazercloudgazer Posts: 2,161member
    Quote:
    Originally Posted by Gatorguy View Post


    But they often do create successes too. A failure by someone else doesn't mean you will. Apple knows that.



    Indeed - and the fact is that Google almost certainly will end up with far more of the online experience than MS could ever hope to capture. But it's not clear how much that would bother a hardware/software integrator like Apple.



    Google wants to turn Facebook into the new myspace, and with a platform of 100million devices they have a good chance. Suppose however they did a deal with Apple and get deep G+ integration into iOS. Suddenly you're looking at 300million G+ enabled mobile devices - and Facebook is suddenly looking very very lonely.



    Apple might be more than happy to do such a deal, if Google agreed to get off their lawn.
  • Reply 16 of 37
    john.bjohn.b Posts: 2,742member
    I see what you did there...



  • Reply 17 of 37
    is 100%
  • Reply 18 of 37
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by ampang701 View Post


    Lion's share is 100%



    It means the largest portion.
  • Reply 19 of 37
    dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by Gatorguy View Post


    But they often do create successes too. A failure by someone else doesn't mean you will. Apple knows that.



    Quote:
    Originally Posted by addabox View Post


    True, but I think the combination of internet as totalizing construct and Google's strategy of using advertising as both the means and funding source for insinuating themselves into every aspect of that construct puts them on a different footing than the Microsoft of old. Google is everywhere and nowhere and ostensibly free, with the true cost of their interlocking network of subsidized services and conduits only calculable once it's so entrenched as to be more or less the world itself.



    Doesn't guarantee success, of course, but I don't know if we have historical antecedents for what they're doing that provide a useful roadmap.



    Maybe, but just. During the 1990s and 2000s Microsoft's ubiquity was total and their ambition to roll anything and everything of value into Windows plainly advertised. They controlled virtually all of the gateways and they were setting themselves up to collect tolls. "Free" in name if not in reality was part of their strategy as well. They even had a name for it: "embrace and extend."



    Experience suggests that total dominance is harder to accomplish than it looks. Microsoft wasn't good enough to make it happen with a 95% market share. I doubt Google is good enough either.
  • Reply 20 of 37
    leonardleonard Posts: 528member
    deleted
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