This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Google, Apple Inflate Patent Bubble

NEW YORK ( TheStreet) -- What's a patent worth in this ridiculously cash-heavy, technologically insecure market? Judging by the last two deals: about $742,647.

Google's (GOOG - Get Report) $12.5 billion plunge into the phone making business with Motorola Mobility (MMI) translates to $735,294 for each of Motorola's 17,000 patents.

And the $4.5 billion Nortel mega deal prior to that, involving Apple (AAPL - Get Report), Microsoft (MSFT), Ericsson (ERIC) and Research In Motion (RIMM) in the RockStar consortium, comes out to a nice, round $750,000 per patent.

Take the average of the two deals, and you get an average patent price of $742,647 apiece.

Obviously, not all patents are solid gold. Any big portfolio is probably a grab bag filled with lots of useless costume jewelry along with just a scattering of precious gems.

But the Google deal and the Apple consortium underscore not just the increased scope of the mobile market, but the underlying value of a deep patent portfolio held by a number of tech giants.

Nokia (NOK - Get Report), for example, jumped 18% Monday on the news of the Google-Motorola deal. That surge pushed Nokia's market cap up by $4.3 billion -- in one day.

That's cheap, said Morgan Stanley analyst Ehud Gelblum, who estimates that Nokia is sitting on 30,000 patents (10,000 patents registered in each region: U.S., Europe and Japan) worth about $20 billion by current valuation standards.

"Nokia's IP valuation upside is encouraging, but only comes if there is a buyer," wrote Gelblum in a note Tuesday. The most likely buyer would be Microsoft, but since Nokia has already agreed to a partnership to make Windows 7 phones, there's not much need to take the relationship farther.

"Nokia's investment case rides on whether or not it will regain competitiveness with Windows Mobile," Gelblum wrote.

The patent math is particularly favorable to outlier RIM, which the company says has 11,000 patents pending and granted, not including the past 18 months of applications or the Rockstar acquisition.

On a per-patent basis, RIM is holding $8.2 billion worth of intellectual property. This could, as analysts say, put a floor under the stock as the company continues to get squeezed out of the smartphone market.

With Motorola trading $2 below the $40 offer price, it looks like the market isn't seeing any additional bidders. And as one investor pointed out: "That probably means no more $10 billion-plus patent deals in the near future."

Welcome to the patent bubble.

--Written by Scott Moritz in New York.

To contact this writer, click here: Scott Moritz, or email:

Follow Scott on Twitter at MoritzDispatch

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.24 -0.41%
GOOG $701.43 0.82%
NOK $5.69 -1.22%
FB $117.81 -0.21%
TSLA $211.53 -4.96%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs