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Would Nokia Go Microsoft’s Way?

Well, with a partnership that did not blossom quite the way that was expected, Microsoft is ensuring that Nokia is hanging in there, just barely though.

With a cash reserve of roughly €4.9 billion, Nokia is running out of time as their sales continue to dwindle and the firm registering losses quarter after quarter. Though, Nokia might have just found one way which might just help them see out the rough weather, till sales of their smartphones improve in the near future.

Like Microsoft, which makes millions of dollars every year from patent royalties, Nokia might also have stumbled upon a rich cash resource which they have been neglecting in the past. Nokia already generates roughly €500 million from patent royalties in mobile telephony, which they can leverage to $7.5 billion or roughly $2 a share.

Recently Nortel Networks sold off its portfolio of patents once it went bankrupt which were picked up by Apple, Ericsson and RIM for around $4.5 billion for 6,000 patents. Now if you calculate that translates to $7,50,000 per patent, which brings the total value of Nokia’s 10,000 patents to $7.5 billion.

Patents in today’s competitive world are very important as it not only allows entry to a firm in the mobile industry but also allows fending off competition or blocking the entry of potential new entrants.  With Google spending as much as $12.5 billion to acquire Motorola Mobility Holdings Inc. for its wide range of industry patents only further emphasizes the importance of patents in this field.

Nokia which was sued by Motorola itself in 1989, for a settlement to the tune of $10 million, has since then ensured that it has protected every bit of its innovation via patents which has set them back by at least $45 billion in research and development in all these years.

Nokia which recently sued HTC, ViewSonic and RIM for patent infringement is also receiving royalties from Apple for each iPhone sold. Nokia might just be able to successfully sue the Chinese giants like ZTE and Huawei. Well, the fact that Microsoft already makes $5 every HTC smartphone sold along with similar arrangement from Samsung, earmarks the huge revenue generating potential Nokia’s patent portfolio might provide.

And with Standard & Poor and Fitch, both giving Nokia shares “junk” credit rating, Nokia is struggling to make ends meet with Microsoft having to pump in $1 billion dollar for using the Windows Phone platform.

Can Nokia directly sell off its patent portfolio to make a substantial sum of it? The answer is no as there are high chances that Nokia might not be able to make as much as Motorola managed. And looking at the fact that Nokia have succeeded in its earlier patent litigations, even Stephen Elop is keen to pursue with it rather than selling off the patent portfolio.