Can Nortel Survive as a Patent Business?

According to Rethink Wireless, Nortel may still have a game plan to survive Chapter XI and preserve its brand and a couple of business activities.

Most of Nortel's valuable wireless patent portfolio was excluded from the sale of LTE and CDMA businesses to Ericsson, This could arguably become the basis of a much smaller, but profitable, business focused mainly on licensing. This is only dependant on whether Nortel can raise sufficient funds from the sale of its other businesses to pay off creditors to the satisfaction of the US and Canadian bankruptcy courts. Avaya is currently looking at buying Nortel's enterprise unit. Nortel apparently plans to keep back patents from the enterprise unit sale too.

The fact that most of the IPR was excluded from the Ericsson deal would also explain the interest of RIM. RIM could see the patents as giving it a headstart over larger rivals in creating LTE BlackBerry devices and services going forward, and may also welcome the boost to its licensing arsenal, both for future revenues and also as a defensive tactic. The company has always engaged in significant patent licensing (and litigation) activity in its core mobile email markets and could aim to increase its value and its ability to 'trade' IPR with rivals.

Confusing reports have been coming from Nortel attorneys over which patents Ericsson was acquiring - one said 125 of the total portfolio of 5,500, another said 600. Ericsson will also license other Nortel IPR. Based on Nortel's estimate that the patents could command a 1% royalty on every relevant LTE device sale in the years to come. JPMorgan recently made the calculation that the patents could be worth between $950m and $2.9bn.

Ericsson Wins Bid for Nortel LTE and CDMA Assets but was RIM Unfairly Excluded from the Auction?

Ericsson emerged as the highest bidder for Nortel’s LTE and CDMA assets in a 12 hour auction which took place on Friday, tabling an offer of $1.13bn.

Most of the other parties known to be interested in the Nortel assets had publicly stated their maximum bids beforehand, giving Ericsson an indicator of how much it would need to stump up. The acquisition will give Ericsson a bigger footprint in North America especially as it includes CDMA contracts with North American operators such as Verizon, Sprint, US Cellular, Bell Canada and Leap.

Ericsson was competing against private equity firm MatlinPatterson’s offer of $725m, Nokia Siemens Network’s $650m proposal, and RIM’s $1.1bn offer, which RIM said has been rejected by Nortel. RIM said during the auction that it was told it could bid only if it promised not to bid for other Nortel assets for one year. But why was the restriction imposed?

RIM and Nortel are both based in Canada, and some Canadian officials said after the Ericsson bid was revealed that they may consider trying to block the sale. If the Ericsson purchase is approved, the company's Plano-based North American operations will have about $5 billion in annual revenue and more than 14,000 employees.

Canadian Industry Minister Tony Clement, who is said to have encouraged RIM to bid for the assets says all options are on the table in the government's evaluation of Ericsson's $1.13-billion US bid for Nortel's wireless unit, including the possibility the government may block the bid if it does not benefit Canada.