So, why does Research in Motion want to buy Nortel’s CDMA and LTE businesses – a move that came out left field?
According to Genuity Capital Markets analyst Deepak Chopra, RIM could be interested in Nortel’s IP:
“The bid for Nortel’s CDMA and LTE access business is puzzling, as this is outside of RIM’s core area of expertise and the networking business is hyper competitive with a lower margin structure,” he said in a research note. “Most companies in the networking space are not making any money. The primary reason for the bid, we believe, is Nortel’s intellectual property, as it has key patents in LTE and CDMA. In a press announcement a year ago, Nortel indicated that it was willing to sign licences for its patents that are equivalent to 1% of LTE revenues. If Nortel’s IP can generate that level of royalty from LTE, the patents could produce hundreds of millions in revenue per year. For example, if 100 million LTE handsets are sold by 2013 with an average ASP of $150, the potential royalty revenues would be $150 million.”
Chopra also suggests that with a stronger IP portfolio, RIM would have more negotiating power with other wireless suppliers:
“As we have mentioned before, RIM is buying patents to build its portfolio and strengthen its negotiating position with other wireless vendors to reduce its effective royalty rate. Essentially, RIM is using its balance sheet to substitute its relatively short history to build its patent portfolio. RIM has spent $1.3 billion on patents over the past two years (also includes Certicom acquisition), and another $270 million to settle with Visto. If the IP is the primary target, we could see RIM sell the network business. As of December 31, 2007, Nortel had approximately 3,650 U.S. patents and approximately 1,650 patents in other countries. It has been reported by industry analyst IFI Plenum that, in 2006, Nortel ranked 69th in terms of number of patents granted by the U.S. Patent & Trademark Office.”
“If the IP is the primary target, we could see RIM sell the network business”
No thanks. CDMA/LTE employees are tired of being under clouds of uncertainity and if RIM was just gonna buy the infra to sell it off, then we are better off with NSN.
ChaiTea
>>If the IP is the primary target, we could see RIM sell the network business
NO THANKS.
CDMA/LTE employees (like other Nortel employees) are tired of being under clouds of uncertainity and instability. If we were to be bought by RIM just for purposes of keeping the IP and then to sell us off to someone else, then we are better off with NSN than RIM.
ChaiTea
Whats with the timeout error, and delay between message edits showing up on this blog? Anyone else experiencing the same?
RedFlag
Can it be that RIM wants to own NT in order to use NT's tax losses accumulated over the years??? These tax losses would offset RIMS profits in furture years so that no tax is paid.
PM_Guy
RIM would have to by Nortel to get access to the Tax losses. They were only bidding for CMDA/LTE and possibly some IP patents. This would not give them access to the tax credits.
protosphere
Malakia on steroids is this paranoia to giving RIM too great of an edge. What's next, trying to get Palm in favor of Blackberry.
If you think Nortel is Canadian when run to the ground by Americans (who in all fairness employ multiply more there) we must question why or how this came to be.
It seems more just and fair in the US where even the OJ of antitrust /Microsoft will never hold a candle to Cisco after dominating and nuking anything in its path after stalking anything that makes a buck after so many years. Foreign Deboer diamonds should have been so lucky in their anti trust lawsuit in the US.
More pressing than why RIM wants CDMA /LTE is why they are inhibited from acquiring it for even more and without Canadian EDC welfare extended to a foreign firm.
RIM has plenty of patents too and who cares who holds what when most are prehistoric and worthless when assessing what relative value they can get as an aggregate from anyone else in a no reserve fire sale.
Why look at a gift horse in the mouth by this profitable company bearing gifts. =) 3G sells now /LTE tomorrow, tax write-offs, their engineers, expanding, who cares… it is more money and without bagholder/EDC bailout where we should question how theses EDC and Mat-Pat bagholders got into this mess extending such great liberties to begin with.
If it remains Canadian with enough centralized power to weed out the tyrants, this young, smart, and philanthropic company should be allowed to clean it up than be snubbed into into the close as fraud trials loom for a company that still pays bonuses while cutting severances, etc, do you think RIM would or could have done this.
To deviating from a Nortel imposed protocol that restricts a bid sounds unethical where one must question the reasoning.
Kangraoo courts, kangaroo AGMs, Nortel even set the specs against rivals in BSNL requiring over 10 years Int'l experience and we saw how that turned out. From paying foreign spys for business to outcry by human rights violations, why should they jump at the redemption of getting cleaned up by a profitable Canadian company with a defrauding CEO that promotes criminally charged pals after the largest fraud in Canada. Americans this time as a Canadian board embers law firm defends done, crooks without borders club.
To handicap RIM means the old boys prefer (or want rather) to sell it to other insiders or bagholders, or a devil they know with this untransparent motive.
Nortel seems to be favored over RIM in Canada for some strange reason, even though Nortanic has consistently done enormous damage with questionable conduct on a consistent basis. How many times have we witnessed corruption at the highest levels recently in our public sector let alone private with less regulation and transparency.
There weren't Americans like Z and Hack running the Canadian Avro Arrow when it was scrapped than taken over, and bear in mind over 80% of our industry in pristine Canada is American owned.
This Canadian company run by questionable Americans, Canadians seem to be held hostage yet again perhaps in fear of making RIM even stronger. Heh, for all we know they negotiate our foreign exchange rates behind closed doors in the formal theatrics that is suppose to make us a separate country …oops. =)
RedFlag
I agree with most everything you say.
Still, I would rather see MP in control of Nortel rather than the current BOD/MrZ fiasco. Even if MP is non-CDN, they would chop heads and let them roll especially the current BOD incl Mr.Z. and other head honchos.
I believe RIM would do the same head chop which is what is needed at NT.
RedFlag
NT structured this bankruptcy sceanrio getting court approval so that no one could buy NT outright and get them fired. Now these guys are collecting bonuses for as long as they can. No wonder they don't want a bid on another unit for a whole year. What a farce.
“Analysts said RIM is interested in the wireless unit for the intellectual property, mainly patents, that come with the Nortel assets. An acquisition of Nortel assets would also likely include some of the company's large losses, which RIM could use to reduce some of its cash taxes of about $1-billion a year.”
Why RIM Wants Nortel
So, why does Research in Motion want to buy Nortel’s CDMA and LTE businesses – a move that came out left field?
According to Genuity Capital Markets analyst Deepak Chopra, RIM could be interested in Nortel’s IP:
“The bid for Nortel’s CDMA and LTE access business is puzzling, as this is outside of RIM’s core area of expertise and the networking business is hyper competitive with a lower margin structure,” he said in a research note. “Most companies in the networking space are not making any money. The primary reason for the bid, we believe, is Nortel’s intellectual property, as it has key patents in LTE and CDMA. In a press announcement a year ago, Nortel indicated that it was willing to sign licences for its patents that are equivalent to 1% of LTE revenues. If Nortel’s IP can generate that level of royalty from LTE, the patents could produce hundreds of millions in revenue per year. For example, if 100 million LTE handsets are sold by 2013 with an average ASP of $150, the potential royalty revenues would be $150 million.”
Chopra also suggests that with a stronger IP portfolio, RIM would have more negotiating power with other wireless suppliers:
“As we have mentioned before, RIM is buying patents to build its portfolio and strengthen its negotiating position with other wireless vendors to reduce its effective royalty rate. Essentially, RIM is using its balance sheet to substitute its relatively short history to build its patent portfolio. RIM has spent $1.3 billion on patents over the past two years (also includes Certicom acquisition), and another $270 million to settle with Visto. If the IP is the primary target, we could see RIM sell the network business. As of December 31, 2007, Nortel had approximately 3,650 U.S. patents and approximately 1,650 patents in other countries. It has been reported by industry analyst IFI Plenum that, in 2006, Nortel ranked 69th in terms of number of patents granted by the U.S. Patent & Trademark Office.”