Nokia has resolved a lengthy patent dispute with Samsung. However, investors are not happy with the financial terms of the deal.
The International Court of Arbitration of the International Chamber of Commerce issued the award for the binding arbitration between Samsung and Nokia. As part of the settlement, Nokia is expecting to gain 1.3 billion euros, or about $1.4 billion, in cash between 2016 and 2018. However, the terms did not reveal the exact financial amount.
Ramzi Haidamus, the President of Nokia Technologies, says that the best solution for settling differences between the two companies was by independent arbitration. Haidamus says that the company welcomes any compensation under the agreement.
Kepler Cheuvreux' analyst, Sebastien Sztabowicz, estimates that the ruling may result in Nokia gaining 200 million to 250 million euros from Samsung. However, the award is less than what was expected by market observers.
The patent licensing business of Nokia has an annual revenue of around 800 million euros. The technologies division of the Finnish telecommunication company, which licenses its patents, estimates Q4 2015 sales of around 400 million euros and full-year sales in 2015 of about 1.02 billion euros. Nokia's shares fell more than 10 percent after the company announced the deal with Samsung.
"There have been expectations that Nokia could make more money with their patent portfolio than (rival) Ericsson.. This outcome did not support that... Estimates will be revised," says Sami Sarkamies, an analyst with Nordea.
In 2014, Nokia sold its mobile phone business to Microsoft. After the acquisition, Nokia focused more on telecommunications network equipment while retaining a massive portfolio of handset patents.
Relationships between companies in the telecom industry are complex. The popularity of smartphones is growing and manufacturers often have to rely upon mutual knowhow.
However, sharing standards can also lead to disputes resulting in legal proceedings with businesses. In the past, companies such as Microsoft and Samsung were involved in similar disputes but they agreed to end the differences.
Nokia has spent heavily in research and development over the last three decades and it manages more than 30,000 patents as well as patent applications that could potentially result in disputes with other companies.
While Nokia believes that ending disputes with the help of an independent arbitrator is best practice, it may have adverse effects on its share value.
Nokia has similar patent disputes with LG. The company is also about to start new talks with Apple.
Photo: Tori Rector | Flickr
