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Major investor suggests Motorola should sell patents

updated 04:10 pm EDT, Thu July 21, 2011

Icahn wants Motorola to consider selling IP

Frequent activist investor Carl Icahn on Thursday triggered a rush on Motorola Mobility's shares after he called on the company to consider selling patents. A 13D filing with the SEC asked the Android smartphone designer to look at "alternatives regarding its patent portfolio to enhance shareholder value." Icahn has 11.36 percent of Motorola's shares and would immediately stand to benefit from any sale.

Motorola's board responded in turn with a rebuttal and said it didn't have any need to sell patents. It argued that its revenue shot up 22 percent in the first quarter of the year and that its patent library, with 17,000 active patents and 7,500 upcoming, was one of the very keys to its success.

The company's claims came at a time when doubts still persisted over its revival as a smartphone-first phone producer. A first full quarter after Motorola's split into two companies, the larger Mobility side posted an $81 million loss and was reporting a bleaker picture than from the past year. Despite a Super Bowl TV ad and the close support of its favorite carrier Verizon, Motorola only sold 250,000 Xoom tablets. Trouble erupted in smartphones as well when the Verizon iPhone arrived, taking away the AT&T exclusivity shelter that had kept Motorola from having to compete with Apple.

Icahn's hopes for a selloff are likely prompted by the recent Nortel patent sale, where 6,000 patents went to an Apple-led group for $4.5 billion. InterDigital, often a foe of phone designers through its patent demands, has been looking to sell itself off and give a large bundle of patents to whoever was the winning bidder. A patent sale could help Motorola fund itself and get more attention in a market where Apple, HTC, and Samsung are increasingly gaining influence.

Patents have been vital for Motorola in recent months and have led to countersuits against heavyweights like Microsoft that are trying to stifle Android.



By Electronista Staff
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Comments

  1. SockRolid

    Forum Regular

    Joined: Jan 2010

    +2

    Cash now or cash later?

    Sounds like Motorola needs quick cash. Selling the patent portfolio would give them quick cash up front. Guaranteed. Patent trolling years from now might pay more, but they would need to wait for the courts to process the suits. And Motorola could lose.

    Better to take the cash now, eh, Moto?

  1. Tjp

    Fresh-Faced Recruit

    Joined: Jan 2010

    +3

    Well, NO

    The only reason for Moto to sell the patents is to exit the phone business. This may make the company a nice profit short term and _may_ increase the stock value (it is really a game, the two are often at odds with reality). But selling off their IP means they are no longer a player. While they do have a fiduciary responsibility to the shareholders they also need to take a long term view. We have stupidly taken a profit now, pain later view all to often. I watched Digital Equipment Corporation sell off IP and whole divisions (like what computer manufacturer needs to make disk drives?) to turn around and pay more for their own inventions now owned by someone else. So badly did it affect them that even innovations like the DEC Alpha AXP (a 64 bit processor in 1991 that was cubbyholed into a 32 bit world and still was 18 months in advance of any competition), those innovations could no longer be coordinated into production of real products. And Compaq bought them as a result. Not that they didn't have enough internal problems like lack of effective sales and marketing in a PC oriented world. But loss of their IP by selling it off was their downfall. But if Moto can no longer compete in the phone market, can no longer attract smart people, can no longer innovate, then they'll die anyway and selling off the IP might get them a bit longer life and the shareholders a small bit more money. But if they are expected to be in there long term, then what a stupid move.

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