Nortel Patent Auction: A Fight for Wireless Dominance

Strategic Insights -

The liquidation sale of Nortel Networks Corp.'s remaining assets, a prized trove of 6,000 wireless-related patents, is set to begin in New York, with technology giants such as Google, Apple, and Ericsson vying for control. The auction, delayed due to significant buyer interest, has the potential to shift the balance of power in the mobile communications market. Google has filed an opening bid of $900 million, while multiple companies, including RPX Corp. and Intel, are seen as possible bidders.

Key Takeaways:

  • Nortel Networks Corp. filed for bankruptcy protection in early 2009 after losing nearly $7 billion since 2005.
  • The company's prized assets include a horde of patents and pending patents containing intellectual property spanning key areas of modern telecommunications, including wireless video communication, Wi-Fi, and internet search technology.
  • The winning bidder will have a "nuclear arsenal" in the war for mobile market share, according to Alexander Poltorak, CEO of General Patent Corp.
  • The auction is expected to generate more than $2 billion in revenue.
  • The winning bidder can use the patents to offset market share loss by extracting payments from rivals in litigation, a tactic used successfully by Nokia against Apple.
  • Microsoft, Hewlett-Packard, and Nokia have objected to the Google bid, citing concerns over continued access to technologies they have negotiated a right to use.

Statistics:

  • 6,000: The number of wireless-related patents included in the auction.
  • $900 million: Google's opening bid for the Nortel patent portfolio.
  • 80+: The number of companies, including RPX Corp., that are interested in at least part of the Nortel holdings.
  • $7 billion: The amount Nortel Networks Corp. lost since 2005 before filing for bankruptcy.
  • $2 billion+: The expected revenue from the auction.
  • $5 billion: The total proceeds from the sale of Nortel assets and business units since 2009.
  • 400: The number of former Nortel employees on disability leave when the company filed for bankruptcy who are pushing for income top-ups from the proceeds.
  • 10,000+: The number of Ontario-based Nortel pensioners who are advocating for proceeds from the auction to be used to bolster their underfunded pensions.

Sources:

  • "Critical delivery, and an almost impossible task." Bloomberg (2011)
  • "Hamilton Spectator Archives." The Hamilton Spectator
  • "Nortel Auction Draws Tech Giants: Bid Amount," Bloomberg (2011)
  • "Patent Fight Tests Justice Department," The Wall Street Journal (2011)
  • "Patent Infringement Case: Nokia vs. Apple," Bloomberg (2011)
  • "Tech Firms Line Up for Nortel Patents," Bloomberg (2011)