Less than a month after Apple (NASDAQ:AAPL) and others
budged Google (NASDAQ:GOOG) aside in its bid for Nortel's patent portfolio, the
iPhone and iPad maker is looking to beat the search engine in another auction:
the assets of InterDigital.
InterDigital hired Evercore Partners and Barclays Capital to look at strategic alternatives, including a potential sale.
The Wall Street Journal said Google is in
discussions with the wireless technology developer and licenser, which holds roughly
8,800 patents relating to transmitting wireless data and other mobile phone and network technologies.
Bloomberg, meanwhile, said Apple is also in the running for InterDigital, which
could put Google in a precarious position as it seeks to fortify its patent
portfolio.
Neither Google nor Apple confirmed any such negotiations, but InterDigital would be super valuable to both companies.
Google is particularly weak in intellectual property
related to mobile devices and networks, which makes it vulnerable to patent
infringement lawsuits regarding its Android open-source operating system.
The company, which is being sued by Oracle over its use
of Java in Android, agreed to buy Nortel Networks' 6,000 patents for $900 million before losing
soundly in the ensuing auction to a consortium of Apple, Microsoft, Sony and
others. That group, which called itself Bidco, paid $4.5 billion for the patents.
Without knowing anything about negotiations, it's clear what Apple has in its favor is more cash. Google has some
$39 billion in available cash and securities, while Apple just closed a quarter
with $76 billion in the bank. Moreover, the company has said it
would use its cash reserves for strategic acquisitions.
This means InterDigital could be girding for a large
payday from Google or Apple. Indeed, Jefferies & Co analyst Peter Misek said they are
about to enter a patent war over InterDigital.
Misek said InterDigital holds about 16 percent of the
essential LTE (Long Term Evolution) wireless patents, with OEMs accounting for 40
percent of handset shipment licensing technology from InterDigital.
The company is also testing a video compression technique
that requires only a fraction of the normal bandwidth without degrading video
quality. Such technology on mobile devices "would be of high interest to
Apple and Google," Misek said.
Were Apple to win InterDigital's assets, it could put
additional pressure on Android, Misek said.
By licensing InterDigital technology and winning lawsuits
versus Android OEMs HTC, Motorola and Samsung, Misek said Apple could cause the
free Android OS to actually become a burden for OEMs, forcing them to become
more conservative in their pricing plans.
"This is likely to slow the price cuts Android OEMs
are likely to bring," Misek said. "So rather than a $150 Android
smartphone, we could see a $200 device that is less likely to hurt a
lower-cost iPhone."
The analyst also estimated InterDigital's patents could
be worth $3 billion to $10 billion to Apple, assuming the company acquires the
concern and inks cross-licensing deals.
"We estimate Apple will ship 500 million phones in
the next four years," Misek said. "Assuming a 5 percent unit CAGR
(compound annual growth rate) thereafter and a 10 percent discount rate, the
InterDigital portfolio could be worth between $3 billion and $10 billion to
Apple."
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