It seems ironic, but in the end Nortel Network Corp.’s future was more valuable than its past.
Criticized for not moving fast enough to take advantage of the shift to new technologies which played a role in it getting protection from bankruptcy in 2009, an auction of Nortel intellectual property that ended late last week pulled in US$4.5 billion from a consortium of some of the biggest names in the industry – Research In Motion, Apple Inc., EMC Corp., LM Ericsson, Sony Corp. and Microsoft Corp.
There were no details on how the group will share the intellectual property.
In a news release RIM said it’s share of the winning bid was US$770 million.
“It’s almost a silver lining for Canada,” said Ron Gruia, the Toronto-based principal telecommunications analyst for Frost & Sullivan, “because some of the intellectual property will stay home with RIM.”
By joining a consortium Waterloo, Ont.-based RIM showed it learned a lesson from the way it previously looked at Nortel’s remains, Gruia added. RIM tried in vain to fight Ericsson’s purchase of CDMA wireless assets in the court of public opinion and in Parliament. This time it at least shares something tangible.
"We believe the consortium is in the best position to utilize the patents in a manner that will be favorable to the industry long term", Ericsson said in a statement. The company said it would contribute US$340 million to the transaction which is expected to close in the third quarter.
The big loser was Google, which is increasingly involved in wireless through its Android operating system for equipment makers but came away empty-handed. Google had started the bidding at US$900 million, but faced a gang of opponents determined to keep the patents out of its hands.
The 6,000 patents cover wireless, wireless 4G, data networking, optical, voice, Internet, service provider and semiconductors.
Gruia pointed out that if the offer is approved by the courts, the consortium will not only be able to use the patents in their products, they will also be able to discourage competitors from using similar approaches through the threat of lawsuits. “It’s almost like insurance,” he said.
The price the winners paid was slightly more than the US$4 billion bidders paid over the past year and a half for its enterprise, carrier VoIP, wireless and Metro Ethernet products.
In previous auctions Ericsson paid just under US$2 billion for Nortel’s CDMA wireless and data switching divisions, while Avaya Inc. paid just under US$1 billion for its enterprise networking business. Ciena Corp. paid US$770 million for Nortel’s Metro Ethernet business, while Genband paid just under $300 million for Voice over IP products.