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Nokia sells 500 patents to Vringo in order to stay afloat

Nokia is going through major financial turmoil right now. During the recession year of 2009, Nokia’s turnover was slashed by a fifth, and profits had crashed by a major volume. In 2010, Nokia’s sales grew and the company’s profit figure grew briskly, however, share price remained record low, which brought burdens for a change in leadership.

Once upon a time, Nokia used to be a world leader in the mobile phone market, but the Finnish company lost it badly in the smartphone war. Companies like Apple, Samsung and other manufacturers making Android devices had better devices to offer than what Nokia was offering then. Perhaps Nokia’s decision for not going the Android way was wrong. Before the launch of Android, Nokia was the indisputable king in the smartphone market, nevertheless, they did see some potential in Microsoft’s Windows Phone 7 and aggressively marketed its Windows Phone powered Lumia range of handsets, but Lumia devices have been slow to pick up. Nokia is still using Symbian S40 operating system on its lower end phones, but its market share in this category is also diminishing due to products from various manufacturers such as Samsung and others.

Few months back, Microsoft revealed that existing phones running Windows Phone 7.5 won’t be able to upgrade to upcoming Windows Phone 8 operating system, which only meant that current Nokia Lumia devices would be pretty much obsolete when Windows Phone 8 launches. This announcement from Microsoft has caused a major dip in Lumia’s sales figure, but later the company announced that it would be upgrading current Windows Phone devices to Windows Phone 7.8, where in which some features from Windows Phone 8, including user interface and few other elements, would be ported back to this version of the operating system.

In the times when Nokia is going through financial bad luck, it is selling off all the unwanted assets in order to keep the company afloat. Today, Vringo, a technology company that develops and licenses mobile patents, has announced that they will be procuring 500 patents from Nokia at a cost of $22 million. In order to cover the costs of purchase, Vringo will be selling off 9.2 million shares which will supposedly raise $31.2 million. The 500 patents that Vringo is acquiring include applications that were filed in various parts of the world, of which 109 patents were issued in United States. Some of the patents are related to wireless 2G, 3G, and 4G technologies.

As a part of this deal, Nokia has entered a non-exclusive license agreement with Vringo which will allow it to continue using the patents. If ever any legal action using the patent portfolio is undertaken by Vringo, Nokia can always choose to reacquire them for a “nominal amount.”

In the second quarter, Nokia shipped about 4 million Lumia devices, but faced $1 billion in operating losses. In June, the company even sold its luxury mobile phone brand, Vertu, to a private equity firm EQT for an undisclosed amount, but retained 10% in the company.

Nokia is also selling its other noncore assets like its Qt software business which was sold to Digia today, thus allowing it to turn its attention towards Windows Phone. The company hasn’t disclosed more details on how much the deal was worth, but hopefully enough to keep the company afloat while Windows Phone gains more traction.

“We are increasing our focus on the products and services that our consumers value most while continuing to invest in the innovation that has always defined Nokia,” said Stephen Elop, Nokia president and CEO. “We intend to pursue an even more focused effort on Lumia, continued innovation around our feature phones, while placing increased emphasis on our location-based services. However, we must re-shape our operating model and ensure that we create a structure that can support our competitive ambitions.”

Launch of Windows Phone 8 can prove to be a catalyst for Lumia range of smartphones. While the tablet business is gaining momentum, Nokia still doesn’t have a solid offering. Maybe it’s waiting for launch of Windows 8 or ARM-centric sibling Windows RT, though like Windows Phone 8, they’re not expected until Q4 this year.

Windows Phone 8 devices such as Nokia Lumia 910 and 920 are expected to debut in September. These Lumia devices will have multicore processors and 720p HD displays. Apart from that, Nokia is also anticipated to include PureView technology that was seen in its flagship device, Nokia 808 PureView. The technology is basically a pixel oversampling technique that essentially decreases an image taken at full resolution into a lower resolution image, achieving higher definition and light sensitivity in the process, and also enabling lossless zoom, which is a pretty nice feature to have on your handheld. Nokia 808 PureView incorporates a monstrous 41 megapixel sensor. A Windows Phone 8 device with PureView technology would be a dream to have and will surely give competitors a run for their money.

Do you think Windows Phone 8 devices from Nokia will be able to help the company escape this financial crisis? Share your thoughts on the matter with us using the comment form below.