The Nokia Patent Deal With Vringo Is A Win All Around

| About: Nokia Corporation (NOK)
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A match made in Finland

Today Nokia Corporation (NYSE:NOK) and Vringo, Inc. (VRNG) announced that Vringo would be buying a selection of high value patents from Nokia. At first I thought the deal seemed odd. I wondered why Vringo would pay a lump sum and then continue to share revenue with Nokia. As I pondered this, the reasoning became very clear.

By striking this deal Nokia is cashing in on its valuable patents, outsourcing the legal troubles and risk of not monetizing extensive and expensive R&D, all the while keeping a portion of any revenue generated from the patents sold. I believe this is a fantastic model and very bullish for both companies. For Vringo it is a fantastic opportunity to diversify and increase its IP revenue streams.

Going forward I am eager to see what kind of relationship comes of this initial deal. I could imagine a scenario where Nokia strikes many similar deals if Vringo generates adequate revenue for Nokia.

I think this a great move for both Vringo and Nokia.

Vringo grabs some solid patents to monetize over the long haul. In return Nokia gets a fair chunk of change, and a steady income stream if Vringo does well. It also gains a greater ability to focus on new innovations without having to focus on guarding or monetizing older innovations. I am a Nokia bull, I think it is making the right moves to create sustainable revenue, cut dead weight, and continue to innovate. This move highlights that and hints at greater things to come.

I was interested in Vringo because of its search advertising patents before, but not quite sold pending the outcome of the Google (NASDAQ:GOOG) case. I have seen that as a somewhat binary event for it. Either Google pays scads of money and the hype is real or Vringo loses the case and the stock tanks. This development gives me confidence that Vringo has its sights on a sustainable future, and potentially has bigger fish to fry.

Disclosure: I am long NOK.

Additional disclosure: I may initiate a long position in VRNG in the next week.