Tag Archives: Carl Icahn

Rumored Investor Stake Fuels RIM IP Asset Speculation

Icahn Interest May Enhance Patent Value or Inflate It –

Patent portfolios are making some investors smarter, others richer and companies confused.

They also are making the job of technology stock analysts more difficult.

Blackberry maker Research in Motion (RIMM) shares were up 6% last week on speculation that activist investor Carl Icahn is interested in the company. Icahn’s interest in RIMM, let alone an actually stake in it, may pave the way for a sale of some or all of company’s assets, especially its patents. At a minimum it has had a positive affect on its share price and IP value.

Icahn recently encouraged Motorola Mobility (MMI) in public filings and statements to seek more value from its patent portfolio resulting in a sale recently to patent-hungry Google (GOOG) for $12.5b. Mobility has 17,000 patents, many in the lucrative 4G LTE space.

Earlier in September activist shareholder, Jaguar Financial Corp publicly urged RIM to consider a sale of the company or a sale of its patents in order to maximize shareholder value. RIM shares are down 30% since the beginning of September.

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Not surprisingly, it is easier to price and sell an IP-centric company like RIM than to value and sell all or some of its patents. It really depends on who is interested and how do they plan to use the patents. It also depends of timing. Without the patents for leverage, RIM’s future may be even more limited than it is currently.

Of late, a broad range of smart investors like Icahn and Jaguar, as well as Nortel buyers Apple, Microsoft, Ericsson, et al. and Motorola Mobility acquirer Google can have a significant impact on significant IP holders’ shares. We are still at the early stages of understanding how patents can influence a business’ performance and market value. But the perception that a company may have valuable IP rights – or is not using them properly – is a powerful tool.

Last week Jeffries & Company equity analyst Peter Misek provided an unusually thoughtful look at the actual value of patents in RIM’s portfolio. Misek wisely retained experts to look at what is actually in the portfolio, what the rights cover and who owns them, not just the quantity.

“In valuing the essential LTE patent portfolios of major players in the wireless space, we utilized outside industry experts that included physics PhDs, wireless engineers, patent legal specialists, and former patent office employees.

“Our work began by first screening tens of thousands of patents and then determined a level of essentiality based on individually examining over 1,400 patents related to LTE.”

Misek concluded that RIM has a lot more patents covering security than highly lucrative 4G LTE inventions.

Jefferies & Company believes that the patents are worth about (only) $1b if RIM continued to practice them, but would be valued at as much as $2.5b if the company is sold outright now where they can be used by others.

What I believe Misek is saying is that because of RIM’s weakening market share it is good but far from ideal patents are worth significantly more to others than itself.

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Exhibit 2: Essential LTE Patents: Detail

Patent Holder % Ownership of Essential LTE Patents,
Estimated Value ($M)

LG                           23%         7,907
Qualcomm               21%         7,329
InterDigital               9%           3,279
Motorola                  9%           3,279
Nokia                       9%           3,086
Samsung                 9%           3,086
ZTE                          6%           2,121
Nortel                       4%           1,350
ETRI                        2%              771
TI                             2%              771
Ericsson                  2%              579
NSN                         2%              579
RIM                          1%              386
Freescale                1%              193
Huawei                     1%              193
NEC                         1%              193

Source: Jefferies & Co.
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The Nortel auction set the stage for IP value recognition as well as patent price inflation.

Prices for “must have” patents clearly are in a class by themselves. Perceived need and costs of R&D and patent litigation figure into the calculus; so does a business’ ability and appetite to fend off enforcers. “Nice to have” and “need to have” have very different connotations both in the IP world and on Wall Street.

Some on Wall Street, like Peter Misek, are finally making an informed attempt to put patent value into shareholder perspective. Let’s give them credit for trying.

 Illustration source: tacticalip.com

$12.5b Motorola Sale Nets $1b for “Activist” IP Investor Carl Icahn

Recognition of Patent Value Results in Big Shareholder Win –

In developments discussed recently in IP CloseUp, activist IP investor Carl Icahn has made a truly historic impact on the wireless and intellectual property industries with the sale of Motorola Mobility to Google for $12.5 billion.

A couple of weeks ago in an SEC filing Icahn put pressure on Motorola Mobility management, demanding it explore the sale of patents in the wake of the Nortel’s $4.5 billion auction. This move resulted in yesterday’s announcement.

His 26.8 million shares are now worth over $1 billion, up from $655.8 million on Friday. They were worth less than $500 million when Icahn filed an amended 13D on July 20 to suggest that management explore patent sale options. Icahn also urged Motorola two years ago to split into the company into two entities, the Droid-owning Mobility (MMI) and Motorola Solutions (MSI).

It appears that patent-hungry Google has come away a winner, with more than 17,000 focused patents and about 4,000 applications. It also has acquired a business that appears to be in the turnaround mode, reporting strong profits. Shares of InterDigital, whose patents had been sought by Google, dropped just under 20% on Monday. InterDigital will likely continue to be pursued by other smartphone providers, probably at a lower valuation.

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Yet to be answered: What will the deal mean to Google’s Android users like HTC, Samsung, Kyocera and LG?

With Motorola, Google be competing more directly with them in smartphones. Might its OEM partners choose to seek an operating system like Microsoft’s Windows Phone 7 or other non-competitive alternatives. Microsoft and Nokia already have agreed to work together.

If so, a Google hardware spin-off may be not-too-far down the road.

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Icahn’s victory is not without its dark side: According to Fortune, “Based on Google’s $40 per share acquisition price, Icahn’s MMI stake currently is valued at around $1.07 billion. His MSI position is at around $1.23 billion. If we add that to the $1 billion in earlier disposals, Icahn has realized or holds around $3.3 billion in Motorola and its successor companies. That’s just 3.5% below Icahn’s original investment — or $120 million — compared to the double-digit percentage losses he previously was facing. For example, he was down more than $700 million when Bloomberg did its math.”

This is not the first time good patents have bailed out investors. It won’t be the last.

Image source: onenewspage.co.uk

Valuations Soar on Smartphone Patents and Stocks

Speculation is Boosting Some Companies for Now; The Shortsighted are Paying a Premium to Compete –

What hath the Nortel auction wrought? Never before has it been so apparent that the right patents in the right hands (at the right time) are valuable financial assets.

InterDigital’s stock had been up 73% since July 18, a period which saw a better than a 15% across the board market correction. As of this morning InterDigital (IDCC) is stil up an astonishing 57.5% year-to-date.

After bidding $4 billion for Nortel Networks wireless patents and losing to a group let by Apple and Microsoft, Google has purchased more than 1,000 patents from IBM. Most of the patents, I understand, have little to do with Google’s primary businesses. Google continues to be in discussions with InterDigital. Now, apparently Samsung, Apple and others are interested in ID’s portfolio or, possibly, the entire company. This has bid the stock price up considerably.

TechCrunch wrote on August 4 that Google, late to the patent game, is in a tight corner and may be an unwilling buyer. (4G patents are terrific, but wouldn’t Google benefit from acquiring other, somewhat less expensive but strategic patents that read on Microsoft, Apple and others’ products? The IBM purchase were likely castoffs from its vast portfolio. High-performing IBM does not currently appear to need the cash but may be more motivated by Android/Linux success.)

Personalized Media Communications, for example, has 59 self-generated patents than read on many mobile and other display devices. It already has settled suits with Motorola Mobility and Cisco, and a number of patents have successfully survived re-exam. PMC is not the biggest name in technology, but it may have the strategic assets some businesses need to compete on the IP front. (Brody Berman Associates has advised PMC about its portfolio.)

Assuming a 5 percent unit compound annual growth rate and a 10 percent discount rate, the InterDigital portfolio, believes InvestorsHub, could be worth between $3 billion and $10 billion to Apple.

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Icahn Picks Bone with Motorola Management in 13D Filing

Lately significant investors who not ordinarily care about patents or IP strategy have become increasingly vocal about them. This is especially true of investors in companies that operate in the mobility field.

Activist investors are not new. For decades they have been pressuring senior managements about how to best use tangible assets, like real estate and cash. Now, however, the have become more vocal about deploying valuable intangibles, like patents.

Witness billionaire investor Carl Icahn, the biggest owner of Motorola Mobility Holdings (MMI) shares. Icahn recently stated in an amendment to his 13D SEC disclosure that he believes that Mobility should generate more value from its portfolio of some 17,000 patents, especially in wake of the Nortel sale.

“The Reporting Persons believe that the Issuer’s patent portfolio, which is substantially larger than Nortel Networks’ and includes numerous patents concerning 4G technologies, has significant value. In addition, there may be multiple ways to realize such value given the current heightened market demand for intellectual property in the mobile telecommunications industry.”

Over a two-day period ending July 21 Mobility’s share price shot up 12.4% to $25.19. It was as high as $27.68 after the Icahn comments, marking an approximately 23% move.

In a formal response, Motorola management defended itself vaguely saying “Motorola Mobility’s Board of Directors and management team continuously reviews the Company’s strategic direction and opportunities that it believes are in the best interests of the Company and all of its stockholders.”

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In fairness to Mobility’s management, monetizing a complex IP portfolio is not as simple as calling for an auction and recording bids. Also, it is not merely a numbers game: “My 4G portfolio is bigger than yours.”

Still, former TWA, Marvel, and Clorox investor Icahn is well-aware, entrenched value is dangerous to shareholders and wasteful to all. (Full disclosure: an Icahn-led group retained my firm Brody Berman Associates, to conduct investor relations for Marvel Entertainment after its bankruptcy filing.) He is also aware of the power of perception and supply and demand.

The high cost of R&D and freedom to operate are motivating the current market. So is the pain of litigation. Companies humbled by patents they do not own are a healthy sign. Without significant damage awards and the occasional injunction this would unlikely be the case. Despite what some economists might think, recognizing the value of invention rights is a plus for innovation, business and even consumers.

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Eventually the mobility patent speculation will come back down to earth, as will the recent panic selling in the broad market. Remaining will be the machinery for intensely competitive (and sometimes collaborative) patent acquisitions that has been set in motion. Companies holding the right assets are enjoying the ride.

Image sources: ipfrontline.com, endgaget.com, pulse2.com 


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