Google Rivals for Nortel Assets May Mean Bids Top $1 Billion

Google Rivals for Nortel Patents
A Motorola Mobility Holdings Inc. Atrix mobile mobile handset. Photographer: Denis Doyle/Bloomberg

Google Inc. is facing possible rival bids for Nortel Networks Corp.’s portfolio of technology patents that could push the sale price to more than $1 billion.

RPX Corp., a San Francisco-based patent-buying firm, is considering a bid for the assets, Andrew Kent, an attorney for the company, said during a bankruptcy court hearing this week. Research In Motion Ltd. is also weighing an offer, two people familiar with the company’s plans said last month.

Nortel, a Canadian phone-equipment maker that filed for bankruptcy in January 2009, is selling about 6,000 patents and patent applications. The portfolio will give the winning bidder rights to control and license wireless-video technologies and others that may be valuable for future generations of smartphones such as Apple Inc.’s iPhone and RIM’s BlackBerrys.

Google, whose Android software runs phones made by Motorola Mobility Holdings Inc. and Samsung Electronics Co., offered $900 million for the patents last month, in what Toronto-based Nortel said was a starting point for an auction. To top Google’s bid, companies have to offer at least $929 million under rules approved by the two courts overseeing Nortel’s bankruptcy.

“I believe RPX can go higher,” Peter Holden, a partner at Coller Capital, which reviewed the Nortel portfolio, said in an interview. “The Nortel portfolio is a big threat to everybody. Whoever buys this has a very big nuclear weapon. Moving forward, there’s only RPX and a cash-rich corporation that will counter the Google bid.”

The price for the patents may reach $1 billion or $1.5 billion if there’s a bidding war among multiple groups, he said.

Previous Auctions

Nortel’s previous auctions involved bidders who drove up prices.

The company’s wireless equipment business was bought by Ericsson AB in 2009 for $1.13 billion after six rounds of bidding that included Nokia Siemens Networks and MatlinPatterson Global Advisers LLC. Last year, Ciena Corp. acquired Nortel’s optical-networking business for $773.8 million in cash.

This time, RPX, which represents companies including Sony Corp. and Cisco Systems Inc., had questions about the auction rules governing joint bids by multiple companies, Kent, with the law firm McMillan LLP in Toronto, said in comments to Ontario Superior Court Judge Geoffrey Morawetz in Toronto.

Before Nortel won court permission on May 2 to hold the auction, the company’s agreement with Google prevented Nortel officials from talking to RPX or any other potential bidders, according to court records. That ban has now been lifted.

Bidding Deadline

Nortel has set up a database with details about the patents that potential bidders can access after signing an agreement to keep the information confidential. Bidders must notify Nortel of their intention to participate in the June 20 auction by June 13, according to the bidding rules.

Greg Spector, an RPX spokesman, confirmed that Kent represents the company and declined to comment further.

RPX, which began trading yesterday on the Nasdaq Stock Market, rose 78 cents to $24.66 at 4 p.m. New York time. Google slid $1.52 to $534.27.

RPX has spent more than $250 million buying patents since its inception in July 2008 for companies including Cisco, Sony, Samsung and Nokia Oyj, according to an investor prospectus.

Google’s Bid

Google may want the patents to protect handset makers like Samsung and Motorola that have adapted Google’s Android operating system for mobile devices, Holden said. Companies such as Apple have sued several manufacturers of Android devices alleging patent violations.

“If successful, we hope this portfolio will not only create a disincentive for others to sue Google, but also help us, our partners and the open source community--which is integrally involved in projects like Android and Chrome-- continue to innovate,” Kent Walker, senior vice president and general counsel for Google, said in an April 4 blog.

A call to Nortel Chief Strategy Officer George Riedel’s office was referred to Nortel’s press office, which declined to comment in an e-mail. A message left for Google spokesman Aaron Zamost wasn’t returned.

RIM co-CEO Mike Lazaridis declined to say whether it will bid on Nortel’s patents when asked by an investor at the company’s annual analyst day on May 2. Jim Brady, a Cisco spokesman, and Lisa Gephardt, a Sony spokeswoman, declined to comment.

Bidding Group

RPX’s other clients include SAP AG, Sharp Corp., Verizon Communications Inc., Panasonic Corp. and Google, according to the same prospectus. The bidding group for a particular set of patents could include some clients and not others, said Holden.

Nortel filed for bankruptcy after a loss of $5.8 billion as its customers put off spending on new equipment amid the recession. Since then, Nortel has raised about $3 billion for its creditors by selling businesses, with the patents portfolio the last of the major assets to be sold.

The case is Nortel Networks Inc., 09-10138, U.S. Bankruptcy Court, District of Delaware (Wilmington).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE