Nokia likely to net $608M in Apple patent settlement

On news of the deal, analysts move quickly to figure out the revenue impact on the handset maker. One analyst says the quick win doesn't change long-term picture.

Nokia likely extracted a one-time $608 million payment from Apple as the companies settled their patent litigation, but the long-term health of the company depends on products not royalties.

Following news that Nokia settled its patent litigation with Apple, which is now licensing patents from its rival, analysts quickly moved to figure out the revenue impact. Nokia said that Apple's payment will boost dismal second-quarter results.

Deutsche Bank analyst Kai Korschelt said in a research note that Nokia is likely to get a 420 million euro payment in the second quarter. That sum, which translates to $608 million, assumes a 1 percent royalty rate on all 110 million iPhones sold up until the first quarter at an average selling price of $550 million.

That figure is roughly in line with historical patent cases. In March 2006, Research In Motion paid NTP $612.5 million to settle litigation. Nokia paid Qualcomm $2.3 billion in 2008. Meanwhile, Qualcomm agreed to pay Broadcom $891 million over four years in April 2009. Samsung and LG both agreed to pay Kodak big patent bucks in December 2009 with settlements of $550 million and $414 million respectively.

Recurring revenue payments for Nokia will probably come out to 95 million euros, or $137.6 million, a quarter, said Korschelt.

Morgan Stanley analyst Patrick Standaert said that Nokia's quick win doesn't change the long-term picture.

The patent litigation settlement with Apple gives Nokia a profit stream of ongoing royalty payments and an indirect exposure to Apple's success. However, Nokia is a product company and we need to see success in the new smartphone strategy to become more positive in the long term. Nokia's patent win does little for the long-term picture. Nokia still has to transition to Windows Phone 7 devices and keep some market share going forward.

 

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