Richard Lloyd

Yahoo! CEO Marissa Mayer held out the possibility of the company becoming one of the largest non-practising entities in the world on a conference call with analysts yesterday. Her comments came shortly after it was confirmed that Verizon was buying the fallen internet giant’s core business for $4.83 billion.

While that deal will involve the bulk of Yahoo!’s traditional business, it does not involve the Excalibur patent portfolio, a stockpile of around 2,700 assets that the company has spun out into a separate vehicle to be sold separately. The expectation has long been that they would go to an industry buyer, perhaps one from overseas, or a consortium of tech companies, perhaps fronted by an aggregator like RPX, but Mayer’s comments provide an indication that they could end up remaining part of the legacy business, which will also include stakes in Alibaba and Yahoo! Japan.

“We have been pursuing active marketing and a sale process around the Excalibur portfolio and we are assessing different opportunities because one possibility is a sale and another possibility is to have the patent portfolio stay at Remain Co and be monetised strategically there. The strategic review committee is looking at how to maximize that value,” Mayer said. 

The general message during the call was that there was no inherent rush to sell the Excalibur portfolio and sealing the Verizon transaction may have given Yahoo!’s advisers, which include Blackstone IP, more time to find a buyer for the patents. But there’s also the very real possibility that Yahoo! is simply struggling to find a buyer. If someone were prepared to pay out the $1 billion that the company is reportedly after for the assets then it’s safe to assume that we would have seen a deal by now.

Speculation has been mounting about Yahoo!’s IP assets ever since the company confirmed that it was placing its core business up for sale. In April a number of news stories reported that the internet giant could be sitting on a multi-billion dollar IP bonanza. Those claims led a number of valuation experts to cast doubt on the sky-high numbers giving the general impression that Yahoo! would do very well to flog its entire portfolio for anywhere close to $1 billion. Given that Excalibur does not involve the entire Yahoo! portfolio, the safest assumption is that if a deal is done the price tag will be something in the hundreds of millions.

As with any large portfolio in the tech space potential buyers have to weigh up the possible impact of the Supreme Court’s Alice decision which has created a lot of uncertainty around patent eligible subject matter. That has led to one report that over 40% of the Excalibur portfolio have “high severity” issues and face the very real prospect of being invalidated, most likely in a post-issuance review. – although the word at IPBC Global in Barcelona in June was that this percentage is much lower.  

So while the market rumour mill has been buzzing with stories that few buyers have shown serious interest in the assets at the right price, Mayer’s comments yesterday might be an attempt to flush out some bids from the tech community. Even though validity questions hang over the portfolio, the Apples and Googles of this world are presumably not keen to spend the time and money challenging the patents in court. By reminding the market that Excalibur could very easily become an NPE, Mayer might have focused a few minds in Silicon Valley and Asia, so bringing the prospect of a deal closer.