Patent-Licensing Companies Signal Interest in Nortel’s LTE Portfolio

Although debate rages about the approximate value of Nortel’s unsold LTE and other wireless patents, a market for those patents is sure to materialize when the insolvent former telecommunications giant finally decides how to dispose of them.

Nortel retains more than 3,000 (some reports say 4,000) patents, many relating to OFDMA, MIMO, and other key attributes of LTE. It now must decide whether it will auction the patents, fold them into a joint venture with a partner company, or keep them and pursue long-term licensing agreements with its former competitors and technology partners.

I have seen estimates of the patents’ worth ranging from $400 million to $1 billion. Ultimately the market will determine value. Nortel’s creditors, not inclined to draw out the process, would prefer to see the patents auctioned rather than consigned to a joint venture or an ongoing business.

Two patent-hoarding companies already have voiced interest in bidding on the Nortel patents.

One is Wi-LAN Inc., which has about 800 of its own patents and annual revenue in its latest fiscal year of C$35.4 million. To consummate a deal for the patents, Wi-LAN might have to create a separate company, with institutional investors providing the necessary capital. Unless there isn’t much of a market for the Nortel patent portfolio, I don’t think Wi-LAN will come away with the prize.

The other party that has expressed a strong public interest in the patents is Mosaid Technologies Inc. In a Reuters story published earlier today, Mosaid’s CEO said his company is prepared for a “highly competitive auction process” for Nortel’s patents.

Said John Lindgren, Mosaid’s CEO:

“The one that is getting the most market attention is the LTE patents and we certainly do have an interest in those.”

“There are some patents that we see as very attractive. We find diamonds in the rock quite a bit. We got our eyes on the specific areas.”

Mosaid has 1,915 patents, but none relating to LTE. Like Wi-LAN, Mosaid might not have the financial resources to prevail in a competitive auction. Like Nortel, Mosaid and Wi-LAN are headquartered in Canada.

Another Canadian company, with considerably more resources at its disposal, already has expressed clear interest in Nortel’s LTE patent portfolio. That company, Research In Motion (RIM), could easily outgun Wi-LAN or Mosaid in an auction. Nortel’s creditors obviously will prefer the highest bid.

If Wi-LAN and Mosaid are RIM’s only competition for Nortel’s LTE patents, you’d have to like the BlackBerry vendor’s chances.

Advertisement

Picking the Carcasses of the Startups VCs Deserted

Startup companies continue to be left in the lurch as venture-capital firms retrench, but established technology vendors aren’t complaining. Instead, they’re benefiting from the situation, seizing the opportunity to pick off capital-starved, distressed startups at fire-sale prices.

A post at the Wall Street Journal’s Digits blog recounts how Silicon Graphics International (SGI) — a company that knows distress when it sees it — spent just $2 million to acquire Copan Systems, a vendor of data-storage hardware that had raised more than $107 million in venture capital since it was launched nearly a decade ago.

Mark Barrenchea, president and CEO of SGI, says his company’s acquisition of Copan represented “great value,” and it’s easy to see why. Still, I wonder what SGI got for its money. Copan had exhausted its operating capital, and one of its creditors had placed it in foreclosure and appointed a receiver.

Probably long before that point, most employees with survival skills and marketable talent would have bolted for the exits. They would not have waited around for last rites to be administered.

Given the circumstances, SGI was practically picking at Copan’s carcass. Then again, Copan had a technology-patent portfolio and an installed-base of customers. Even if it was operating more in word than in deed near the end of its venture-funded existence, its patents and customers gave it significant residual value.

SGI will continue to shop for deals among abandoned and forlorn startup companies. Others are doing likewise. It’s an advantageous time to be shopping for shards of value among the ruins.

Thoughts on HP-3Com, MOFCOM, and China’s Smart Grid

As China’s Ministry of Commerce (MOFCOM) continues its review into HP’s pending acquisition of 3Com, I am attempting to get more information on how the MOFCOM process works and what conclusion the ministry might reach.

After doing some digging, I know more about how MOFCOM operates, what its current priorities seem to be, and how it has resolved previous acquisition reviews. Still, I would not want to wager heavily on the outcome of HP’s 3Com purchase. It should go through, but MOFCOM remains a significant wildcard, consistent in some respects but seemingly arbitrary in others.

If you care to learn more about MOFCOM, how it’s handled recent cases, and how it has become more assured and ambitious in its rulings, I direct you to the MOFCOM website. a recent article on MOFCOM from law firm Sidley Austin, another from law firm Allen & Overy LLC, and a third article (which appeared at The Deal’s website) by lawyers in the employ of Weil Gotshal.

None of those law firms was involved in the HP-3Com deal. That transaction was handled by Cleary Gottlieb Steen & Hamilton, which represented HP, and by Wilson Sonsini Goodrich & Rosati, which acted on behalf of 3Com.

Separate from the deliberations of MOFCOM, another piece of news surfaced this week that might have implications for HP and 3Com. According to a Reuters report that quotes market researcher Zpryme, China will invest $7.3 billion on smart-grid technology and services this year. Moreover, China could spend more than $100 billion upgrading its power-infrastructure in the next decade, according to Yuanta Securities analyst Min Li.

Why, you ask, is that relevant to HP and 3Com? As Cisco knows, realization of the smart grid involves deployment of two-way communications and network infrastructure. Meanwhile, in an IDG News Service story that hit the wires just after HP and 3Com announced the acquisition, we learned that 3Com has a strong presence in Chinese energy sector. To wit (quoting from the aforementioned IDG story):

One area where HP may increase its focus after the 3Com deal is China’s energy sector, said Adam Jura, a senior analyst at Ovum. Gear from H3C is used in Chinese backbone networks including those for its energy and transportation sectors, giving 3Com strong ties in those areas, said Jura. HP could benefit, for instance, from potential smart power grid projects in China spurred by government funding, he said.

If 3Com can hold off Huawei, its former H3C partner, and repel Cisco’s push into China’s smart grid, 3Com and HP could benefit significantly from China’s energy-related splurge.

EU Makes Cisco Wait for Tandberg

Despite protestations to the contrary, Cisco is not having an easy time closing its $3.34 billion Tandberg deal.

First, Cisco had to endure a protracted period of haggling and negotiation with recalcitrant Tandberg shareholders. Eventually, after the gamesmanship and ultimatums receded, Cisco sweetened tis offer and persuaded the Tandberg resistance movement to acquiesce.

Everybody thought it was a done deal. Now, though, regulators at the European Union have extended their review of Cisco’s pending Tandberg acquisition so that they can more closely examine redress of competitive concerns.

Even though Betfair doesn’t yet run a market on whether Cisco’s deal for Tandberg or HP’s pending bid for 3Com will go through, I’d have to think the odds remain heavily in favor of Cisco getting a somber nod of approval from the EU regulators when the review expires on March 29.

Still, Cisco could hardly have known that its pursuit of Tandberg, a videoconferencing vendor of considerable strategic value to the networking titan, would become a Nordic melodrama.

Meanwhile, potential acquirers of Polycom might wait until the end of this month before deciding whether the time is right to close their deal.

Railing Against Cloudspeak

I readily concede that I can be as obtuse as the next guy — maybe a lot more obtuse if the next guy is exceptionally bright. Try as I might, sometimes I just can’t comprehend what others are trying to say.

I suffered a severe onset of this condition in the late 90s when the “next big thing” materialized on a weekly basis and typically vaporized just as suddenly.

Back then, evanescence was portrayed as apotheosis. We had niggling questions about the cliches and impenetrable jargon that were deployed by marketers to describe the next big thing. But we didn’t want to be seen as dim and uncomprehending, so we refrained from demanding clear, transparent definitions and explanations. It was our loss.

Well, now we’re faced with cloud computing. It seems like a simple concept to me, but one with potentially serious implications, likely to result in further industry consolidation and sustained deflationary pressure. For the record, I define it, broadly speaking, as application services provided on demand, as needed, on a subscription basis. Google does it today, as do others.

Don’t get me wrong, though. I’m not a Luddite. I’m not trying to halt the march of progress (as if that were possible). I’m just asking for some candor, clarity, and honesty from those trying to sell us their particular interpretation of the cloud.

Maybe that’s too much to ask in an era of financial chicanery, dubious business ethics, and the utter disintegration of any semblance of a social compact (or community) in most Western nations. Still, ask I will. It’s a stubborn holdover from civics lessons I received in school.

Before we talk about something, we should be able to define it. Socrates might have been a layabout and a carouser, but he got it right when he told students: “If you would speak with me, you must define your terms.”

I wish he were around today as a scribbler in the business press or a trade journalist. He’d force cloud-computing proponents to speak clearly, explain what they mean, and work through the implications and ramifications, if only because that’s what is owed to an audience.

A few months ago, in an address to the Churchill Club, Oracle’s redoubtable Larry Ellison railed against misty, murky cloudspeak. Referring to cloud computing, he said:

“Cloud? Clouds are water vapor. My objection to cloud computing is the fact that cloud computing is not only the future of computing, it is the present and the entire past. Google’s now cloud computing. Everybody’s cloud computing. … All it is, is a computer attached to a network. What are you talking about? What do you think Google runs on? It’s databases and operating systems and memory and processors! What are you talking about?”

Ellison asked that plaintive question back in September, and we’re still getting either too many different answers or none at all.

If you can answer the question — if you can give me a clear, relatively unambiguous definition of cloud computing — I ask that you do so. Please help me see the light through the darkening clouds.