Following in the footsteps of Apple (NASDAQ:AAPL), it looks as if Motorola (NYSE:MMI) may soon join in the IP (Intellectual Property) Wars. Apple has been highly successful as of late, scoring an injunction against HTC for violating two of Apple’s patents (though technically the patents in question are actually implemented within the Android OS) as well as stopping shipments of Samsung’s Galaxy Tab 10.1 in all European Union countries with the exception of the Netherlands.
There are a couple of options and directions which I can see Motorola moving in. The first is the IP War like I stated in the title. The chatter on the street is that Motorola is about to try to maximize it’s IP holdings. During Motorola Mobility’s earning call Sanjay Jha made these statements.
We own one of the strongest and most respected patent portfolios in the industry. We have over 17000 patents granted and 7000 patent applications pending, with particular strength in 2G and 3G essentials, non-essential patents important to the delivery of the competitive products in the marketplace, video, particularly compression/de-compression and security technologies, and, finally, a leading position in 4G LTE essentials. With new entrants in the mobile space, resulting from the convergence of mobility, media, computing and the internet, our patent portfolio is increasingly important. We regularly review the company’s strategies, opportunities and assets, including the IP, with the goal of creating and enhancing value.
…. when I first came here (to Motorola), one of the reasons that I liked this opportunity, was because I had a view that brand and IP portfolio was very strong. As I arrived here and had had a chance to understand our IP portfolio, I actually think it’s stronger then I anticipated. There are really a few areas where our patent portfolio is extremely strong.
1, 2G/3G essentials, I think that is very well understood by the (Wall)street and the industry, and we have monetized that asset over the last few years very well.
2, Probably a little less well known is our strength in patent portfolio in non-essential patents, which are capabilities that are important to have in delivering competitive products in the marketplace.
3, I think is in our video coding/de-coding and security.
4, probably least understood and most underestimated , is our strength in our 4G LTE patent portfolio. As I look at these patent portfolios, I feel very good that we will be able to go forward and find ways to create enhanced shareholder value.
… that (IP royalty) number has come down over the years as a result of licenses that have expired over that period of time, and they are largely related to our 2G and 3G patent portfolios. As we go forward, I think that the introduction of number of players with large revenues, which have come into the marketplace as a result of the convergence of the mobility, computing, internet and other segments, I think that that creates an opportunity for us to monetize and maximize the shareholder value in a number of different ways and we evaluate all of them all the time.
Following up at the Oppenhimer Technology & Commmunications conference during his keynote, Sanjay went in to more depth:
“I would bring up IP as a very important for differentiation (among Android vendors). We have a very large IP portfolio, and I think in the long term, as things settle down, you will see a meaningful difference in positions of many different Android players. Both, in terms of avoidance of royalties, as well as potentially being able to collect royalties. And that will make a big difference to people who have very strong IP positions.”
Statements such as these leave little to the imagination. Mr Jha has HTC, Samsung, LG, and the others in his sights. Instead of choosing to go against the fellow members of the OHA, it would make more sense to team up with the OEMs as well as with Google, to combat Apple, Microsoft, and any other competitor to Android.
A second possibility is that Jha is being lead towards the ideas put forth by Carl Ichan. Carl Ichan – Dubbed an “activist investor” has stated that it is time for Motorola Mobility to consider splitting Motorola Mobility into two separate companies. It was due to Mr. Ichan’s pressure that earlier this year Motorola was split up into MMI and Motorola Solutions Inc (NYSE:MSI). As a major shareholder he is pushing for either this split or for Motorola Mobility to be made available for purchase. Ichan estimates that the current value of MMI is roughly $13 billion dollars, assuming a $4 billion valuation for the patent portfolio, $2.5 billion for the set-top box business, $3 billion for the handset business, and $3.5 billion in cash.
Maybe Jha feels that by playing hardball and threatening to go after Samsung, HTC, Sony Ericsson, and the other Android OEMs, MMI might be able to scare Google into paying a significantly higher price.