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Justin Giles
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I have been investing in the stock market for a number of years now. I invest mostly in value and growth stocks. My financial goal in life is to always have my money working for me. Recognized as one of TipRanks 2013 top financial experts. My recommendations have given investors average returns... More
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  • How Much Are The Nokia Patents Worth To Vringo? 1 comment
    Feb 18, 2013 1:11 PM | about stocks: VRNG

    In August of 2012, Vringo issued a secondary offering of 9.6 million shares @ $3.25 for a total of $31.2 million dollars. One of the purposes of the offering was to raise cash to pay $22 million for the 500 patents and patent applications worldwide that Vringo bought from Nokia.

    So how much are these patents really worth?

    Some people will say the portfolio is worth a lot of money while others will tell you it's worth exactly what Vringo paid for it ($22 million). Let's dig a bit deeper to see if we can uncover the real value of the Nokia patent portfolio.

    First, Nokia had and still has billions of dollars of debt. Because of this they have been selling off assets to reduce their debt and to strengthen their accounting books.

    The $22 Million Dollar Debate

    So why would Nokia sell its patents for $22 million if they have billions of dollars in debt? Are the patents really only worth that?

    Here are some of reasons why Nokia let Vringo have the portfolio for $22 million:

    • At the time of negotiations between Nokia and Vringo, Vringo had around $10 million in cash which of course was hardly enough to buy Nokia's patents. However, working together they reached a deal in that Nokia will receive 35% of all revenues that Vringo gets in litigation that come from this patent portfolio.
    • Nokia didn't want to use its portfolio to go after and sue their own customers. Now that they sold their patents they will not have that worry about that anymore.
    • One of Nokia's top litigators in the United States was David Cohen, who is now a litigator with Vringo. Nokia must have realized that the portfolio was going to the one place that would help maximize Nokia's future revenues so they could get out of their huge debt.

    Conclusion

    Because of Nokia's 35% stake on any revenues generated by this portfolio, there is a lot more value than just the $22 million it sold it for.

    Lets say Vringo averages $25-30 million a year over the next seven years in revenue's from litigation of Nokia's patents. Take out the 35% it pays Nokia and in taxes and Vringo stands to gain around $125 - $150 million dollars. Add in the $60 million in cash Vringo has and that equals out to $1.75 in cash per share.

    $150 million + $60million /120 million shares = $1.75

    The life of the patents have seven years remaining on them. However, if Vringo cannot generate revenue from Nokia's portfolio for whatever reason, then naturally the patents would simply just be worth the $22 million that Vringo paid for them.

    Disclosure: I am long VRNG.

    Stocks: VRNG
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  • What its worth
    , contributor
    Comments (22) | Send Message
     
    Sorry. JJ Ruling?
    2 Mar 2013, 03:36 PM Reply Like
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