By Angus Robertson
At last a slice of good news for Nokia (NYSE:NOK). BusinessInsider reports that Bernstein analyst Pierre Ferragu estimates Apple (NASDAQ:AAPL) is paying Nokia €500 (~$715) million as an upfront payment this quarter to settle its patent dispute. He estimates Apple will pay Nokia an additional €100 (~$143) million the rest of the year.
Apple will be making quarterly payments to Nokia, which could be as much as €55 (~$79) million per quarter by Q4 2012. The payments from Apple will have a material affect on Nokia's business. Ferragu bumped his EPS estimate for the year by €0.02 to €0.22 for this year.
Zacks believes Nokia will benefit from several ways through the settlement:
- It proves the dominance of Nokia intellectual property rights. According to Nokia, the company spent more than $62 billion in the last two decades to develop the wireless industry's strongest and broadest IPR portfolios, consisting of more than 10,000 patents. So far the company has entered into patent licensing agreements with around 40 mobile device makers to use its patents. A giant like Apple will soon join the queue.
- Nokia may now try more aggressively to defend its patent portfolio from important Android-based smartphone makers such as Motorola Mobility Holdings Inc. (NYSE:MMI), Samsung (OTC:SSNLF), and HTC.
- The confirmation of the superiority of its patent portfolio will enable Nokia to give more emphasis in revamping its sagging core business of mobile devices.
- Legal settlement with Apple will stop recurring cash drain from Nokia's exchequer.
GigOM's Bobbie Johnson notes that while the payments may help the company right itself temporarily, they may betray a deeper issue — that it is becoming reliant on others. "Regardless of the rights and wrongs of the case, it's going to be hard to fight the image that everybody else is now keeping Nokia afloat through their payments. After all, these millions from Apple come on top of billions from Microsoft ... as Florian Mueller of the FOSS Patents blog points out — Nokia is preparing to go on the warpath."
Having proven its ability to defeat Apple — after the most bitterly contest patent dispute that this industry has seen to date — is a clear proof of concept. Other companies whom Nokia will ask to pay royalties will have to think very hard whether to pay or pick a fight.