Billionaire Carl Icahn urged Motorola Mobility Holdings Inc. to explore alternatives for its patents after Nortel Networks Corp. sold wireless-technology intellectual property for $4.5 billion. The stock soared.
Motorola Mobility’s “patent portfolio, which is substantially larger than Nortel Networks’ and includes numerous patents concerning 4G technologies, has significant value,” Icahn said today in a filing. “There may be multiple ways to realize such value given the current heightened market demand for intellectual property in the mobile telecommunications industry.”
Nortel, which had filed for bankruptcy in 2009, said on June 30 it would sell more than 6,000 patents to Apple Inc. (AAPL), Microsoft Corp. (MSFT), Research In Motion Ltd. (RIM) and three other companies. The bid was five times the $900 million offered before an auction by Google Inc. (GOOG), which makes the Android software used by Motorola and other mobile-phone makers.
“The Nortel sale was a wake-up call to folks in the financial world,” Ron Epstein, chief executive officer of Redwood City, California-based patent brokerage Epicenter IP Group, said in an interview. “Suddenly they’re thinking, ‘Wait a minute, maybe there’s another resource in the companies I’m investing in that’s not being utilized.’”
Previous Icahn Pressure
Motorola, after pioneering mobile-phone technology in the 1980s and 1990s, fell to 2.4 percent of the market last year, from 21.9 percent in the second quarter of 2006, according to researcher Gartner Inc. Motorola Mobility, made up of the mobile-phone and set-top box businesses, was spun off from what is now Motorola Solutions Inc. in January after shareholderIcahn pressed for a split to improve its performance.
Motorola Mobility jumped $2.78, or 12 percent, to $25.19 at 4 p.m. in New York Stock Exchange trading, the biggest one-day gain since the Jan. 4 spinoff. The stock has dropped 24 percent since the split.
In a statement, Libertyville, Illinois-based Motorola Mobility responded to Icahn by saying its board of directors “continuously reviews the company’s strategic direction and opportunities that it believes are in the best interests of the Company and all of its shareholders.”
InterDigital Inc., a mobile-phone technology designer that owns thousands of patents, said this week it will explore strategic options including a sale. Google and Apple are among the companies weighing possible bids for the company, a person with knowledge of the situation said this week.
Icahn’s filing is important because it means the financial community is realizing the potential for patents to be monetized, said Alex Poltorak, chairman and CEO of Suffern, New York-based General Patent Corp. However, Motorola’s patent considerations are “very much unlike” those of Nortel because the latter had filed for bankruptcy before selling, he said.
“Motorola is a company that is actually engaged in business,” Poltorak said in an interview. “The Android-based phones they are selling are in high demand.”
Motorola sells phones that use Google’s Android software, including the Droid and the Atrix, which went on sale in the U.S. in February. Android is the fastest-growing operating system in the smartphone market, according to Gartner.
Patents can play two important roles in a company, especially as patent disputes over smartphone technology are becoming more common, Poltorak said. They can be used “offensively” by suing competitors for infringement, and they can be used “defensively” to look for ways to countersue a competitor.
For Motorola, however, Icahn’s filing may do little to change the company’s strategy, he said.
“They have been buying and selling patents for years,” Poltorak said. “Mr. Icahn is not opening any new horizons by suggesting they explore alternatives.”
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