The $2 billion Apple licensing deal validates Nokia's portfolio and its strategy; expect more to follow 31 Jul 17
If you were looking for clues as to why Apple is fighting its patent battle with Qualcomm so intensely, you might find some in the latest quarterly results announced by Nokia. These reveal a one off payment of over $2 billion to the Finnish company following the worldwide settlement of the dispute between the pair in May, as well as ongoing royalty payments. Even for a business as cash-rich as the iPhone superpower, that’s a serious amount of money – and a considerable blow to pride.
As the entire IP market knows, Apple fights its corner relentlessly and ruthlessly; so to be forced – and that is surely the right word – into forking out such an amount must be a bitter pill to swallow in Cupertino. Other deals, though not on the Nokia scale, have also been done relatively recently with Ericsson, InterDigital and Huawei. That the Qualcomm dispute is getting more hard-core by the day indicates just how much is at stake for both sides. Certainly, Apple will do all it can to avoid another huge pay-out; while Qualcomm is sending every signal possible that this is a battle it feels it cannot afford to lose.
That dispute will play out in courts and regulatory authority meeting rooms around the world over time, and we will have to wait to see what happens. A settlement, at some point, still looks the most likely outcome, but with so much at stake no-one should bet on it.
What we can say for certain, though, is that for Nokia – and its patent business team led by Ilkka Rahnasto – it has been a tremendous few months. This was acknowledged by the company’s CEO Rajiv Suri in his comments on the first half of the financial year when he referred to “the excellent performance of Nokia Technologies”, where the patent business function sits. To get a one-off $2 billion from Apple with more to come was a spectacular result; indeed, it may represent the biggest publicly-announced return on a single licensing agreement there has ever been. I certainly can’t remember one of close to a similar size.
But it was not just the Apple deal. Suri referred, too, to the recently concluded Xiaomi agreement: “We also closed a licensing deal with Xiaomi, a milestone win with a Chinese smartphone vendor, setting the stage for us to engage further with other vendors in the country.” Two things stand-out here:
The first is that Suri talks about “a licensing deal” rather than the acquisition that was mentioned in the original press release announcing the hook-up. Given that quarterly statements are pored over by dozens of lawyers before they are put out, this was not a slip of the tongue or a CEO not quite using the right term. Instead, it suggests that the “cross-licence” the press release referred to may well come with Xiaomi royalty payments to Nokia as well.
The second, which probably reinforces the first point, is that Suri refers to the deal as “a milestone win”, not as a win-win. This basically tells us Nokia approached Xiaomi, pointed out a problem and ended up getting precisely what it wanted.
That is pretty much a home run. And to achieve it on top of the Apple deal in a climate that is not conducive to patent owners shows a business team operating at a very high level. As Xiaomi’s Paul Lin told this blog: “The Nokia team is not soft … They are persistent and professional; they understand the key elements well and negotiate hard. Each party did a lot to defend their own interests, and at the end of the day we did a deal that I think both sides can be happy about.”
Most significant of all about the last few months for Nokia is what they promise for the future. The Apple and Xiaomi agreements are not only big news in and of themselves, but they are also a major validation of a high-quality portfolio built up over years of heavy investment in R&D, as well as of the strategic approach the company has decided to take to exploiting it. When Apple and Xiaomi have sat down and done big deals, it will be a brave business that decides against doing so when Nokia knocks on the door.
Rahnasto, licensing chief Eeva Hakoranta and the rest of the patent business team at Nokia have shown themselves to be operators of the very highest calibre, but they will be the first to admit they could not have done it without the tools the company’s scientists, engineers and patent attorneys have provided for them. Thanks to their efforts, Nokia looks set to be announcing plenty more high-level IP-based deals over the years to come.
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