Both companies have patent portfolios that have surely been assigned higher
values after Google paid up for Motorola’s. Nokia claims 10,000 patents,
built up through €43bn spent on research and development over two decades.
RIM recently added to its sizeable patent stable. But deals need to be
struck to help release the value of those patents – or of the companies
themselves. This could prove a challenge.
The two companies are priced to sell: Nokia’s $17bn enterprise value is 6
times forward earnings before interest, taxes, depreciation and
amortisation. RIM’s, at $11.5bn, is about 3 times. Nokia deserves the higher
valuation by virtue of having a possible buyer in Microsoft. It is moving to
Microsoft’s operating system, creating a situation analogous to
Google-Motorola. Microsoft could buy Nokia (using, conveniently, overseas
cash) without having to struggle with an operating system switch. If it
decides vertical integration is not the future, it can keep the patents and
sell whatever is left of the hardware business.
Even at a diminished size, however, buying Nokia would be a big bet for
Microsoft as it digests its recent $8.5bn purchase of Skype. And there seems
little downside for Microsoft in being patient, seeing how the Nokia
collaboration proceeds and hoping that Nokia’s share price continues
southward.
RIM’s situation is worse still. The company is in the midst of upgrading an
operating system that had fallen woefully behind, has no other industry
player using it, and which has seen its key differentiators – bandwidth
efficiency and security – competed away. With its famous keyboards easily
reproduced, RIM has to turn itself round or may see those patents sold at
auction.
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