On September 3, Microsoft Corp. took the latest step in its transition to a device and services company when it agreed to purchase Nokia for $7.2 billion. According to Forbes, Microsoft will pay $5 billion for Nokia's mobile phone business and $2.2 billion to license Nokia's massive patent portfolio. Additionally, Nokia will assign its long-term patent licensing agreement with Qualcomm to Microsoft.
The deal gives Microsoft access to a staggering amount of intellectual property, according to Animesh Kumar, founder and chief solutions officer at iRunway. Kumar, whose company published a report on September 4 examining mobile patents in the 2G and 3G landscape, told LTN that Nokia owns the largest number of seminal patents, i.e., patents evaluated in terms of market impact, technological innovation, and legal strength. According to the report, Nokia owns 16.55% of all so-called seminal patents in the 2G and 3G realm while Qualcomm is third with 13.08%. Nokia also owns the largest number of standard essential patents — patents that comply with technical standards in the telecommunications industry, with 26%.
"Nokia was really at the forefront of mobile technology and are responsible for many of the building blocks for what we have now," said Kumar. While most companies are focused on 4G-LTE technology, Kumar says 2G and 3G technology remain important, especially in the area of noise reduction and data security where Nokia has several significant patents.
Mobile lawyers looking for Microsoft Office apps on their smartphones may soon have more options than what is available on Android and iOS devices. Microsoft recently surpassed BlackBerry Ltd for third place in the smartphone market, but remains well behind rivals Apple Inc. and Samsung Electronics. Microsoft held talks to buy Nokia in June, only for the deal to fall apart over money, reports the Wall Street Journal. The company is undergoing a change in leadership as CEO Steve Ballmer, who has held his position since 2000 when he succeeded company co-founder Bill Gates, announced his intention to step down in late August.
"This is fantastic deal for Microsoft," said Kumar. "Now it can be on equal terms with Samsung and Apple, at least in terms of IP. Plus, Microsoft is getting some very talented individuals from Nokia." In fact, several media outlets have already identified former Nokia CEO Stephen Elop, a former Microsoft executive who will return to the company to oversee the integration of the two companies, as Ballmer's eventual successor.
A number of law firms stand to benefit from Microsoft's telecom dealings. The deal is also a potential winner for Nokia. According to Reuters, Nokia's decision not to sell its patents to Microsoft allows Nokia to continue generating revenue by enforcing its patents against other companies. According to the article, by selling off its phone business, Nokia would have an advantage in litigation because opponents could not counter-sue them. "Once we no longer have our own mobile devices business, following the close of the (Microsoft) transaction, we would be able to explore licensing some of those technologies," a Nokia spokesperson told Reuters.
Not all analysts were bullish about the deal. Salon's Andrew Leonard called the merger "a desperate move by two companies flailing to stay relevant in a mobile world dominated by Apple, Google and Samsung" and that there was "no reason why turning 32,000 Nokia employees into Microsoft employees is going to make Windows smartphones any more attractive to a global audience." Business Insider agrees, pointing out that neither Nokia nor Microsoft has proven it can make a strong, popular smartphone.
Victor Li is an LTN staff reporter. Email: [email protected].
