Twitter (TWTR) Acquires 900 IBM (IBM) Patents

NEW YORK (TheStreet) -- Twitter (TWTR) announced Friday that it has acquired 900 patents from IBM (IBM) for an undisclosed sum.

Twitter gained 2.1% to $64.77 and IBM fell 0.6% to $176.53 in midday trading.

The sale comes with a cross-licensing agreement that will let IBM continue to use the technology outlined in the patents. The deal ends a dispute between the two companies over the patents that IBM believed Twitter was infringing.

"This acquisition of patents from IBM and licensing agreement provides us with greater intellectual property protection and gives us freedom of action to innovate on behalf of all those who use our service," Twitter legal director Ben Lee said in a statement.

The patent deal greatly increases the size of Twitter's patent portfolio. The social networker owned nine U.S. patents with 95 patents pending as of Sept. 30. With its Inventor's Patent Agreement, the company has promised it won't use patents its engineers and designers create for "offensive litigation" without the creators' consent.

IBM is consistently granted to most U.S. patents every year for the past 20 years.

TheStreet Ratings team rates INTL BUSINESS MACHINES CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate INTL BUSINESS MACHINES CORP (IBM) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, good cash flow from operations, increase in net income and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • INTL BUSINESS MACHINES CORP has improved earnings per share by 11.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, INTL BUSINESS MACHINES CORP increased its bottom line by earning $15.02 versus $14.41 in the prior year. This year, the market expects an improvement in earnings ($18.00 versus $15.02).
  • Net operating cash flow has slightly increased to $6,528.00 million or 2.86% when compared to the same quarter last year. In addition, INTL BUSINESS MACHINES CORP has also modestly surpassed the industry average cash flow growth rate of -4.66%.
  • The net income growth from the same quarter one year ago has exceeded that of the IT Services industry average, but is less than that of the S&P 500. The net income increased by 6.0% when compared to the same quarter one year prior, going from $5,833.00 million to $6,184.00 million.
  • Despite the weak revenue results, IBM has outperformed against the industry average of 17.7%. Since the same quarter one year prior, revenues slightly dropped by 5.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the IT Services industry and the overall market, INTL BUSINESS MACHINES CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: IBM Ratings Report

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