Does the Nokia (NOK)/Vringo (VRNG) Patent Deal Mean RIM (RIMM) is Overvalued?
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There has been much in the way of patent litigation spawning over the last several weeks (Apple and Samsung, Apple and HTC, Microsoft and anyone) and many large mergers over the last year in the mobile-sphere have been mainly for IP assets (Google and Motorola, Microsoft IP with AOL).
But, does the latest Nokia (NYSE: NOK) deal with Vringo (AMEX: VRNG) paint the picture that patents, well, just aren't worth what they used to be?
Under terms of the deal, Vringo will acquire 500 patents, with 109 being U.S. patents, for $22 million, plus to the extent that the gross revenue generated by such portfolio exceeds $22 million, a royalty of 35 percent of such excess.
Let's say RIM has just over 3,000 patents. Prior analyst estimates had total value of the portfolio at $5 billion to $7 billion, or so. This comes from the AOL/Microsoft patent deal in April, where Microsoft paid over $1 billion for more than 800 patents. The math comes out to about $1.3 million per patent, with some being valued more than others.
So, the Nokia/Vringo deal works out to $44,000 per patent or $201,835 per U.S. patent. For the 31 essential patents (here, under "ESSENTIAL CELLULAR PATENTS" at the bottom) that works out to $709,677 per patent. Those calculations don't include the royalty fee mentioned above.
Given the above information, is Research In Motion still overvalued, even though its market cap has fallen to about $4.2 billion? (NOTE: It is challenging to draw a direct correlation from the above information without specific details of the patents sold and what is in RIM's portfolio. We understand this, it's just an observation.)
Shares of RIM are up 4.7 percent on the session, following IBM chatter earlier.
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But, does the latest Nokia (NYSE: NOK) deal with Vringo (AMEX: VRNG) paint the picture that patents, well, just aren't worth what they used to be?
Under terms of the deal, Vringo will acquire 500 patents, with 109 being U.S. patents, for $22 million, plus to the extent that the gross revenue generated by such portfolio exceeds $22 million, a royalty of 35 percent of such excess.
Let's say RIM has just over 3,000 patents. Prior analyst estimates had total value of the portfolio at $5 billion to $7 billion, or so. This comes from the AOL/Microsoft patent deal in April, where Microsoft paid over $1 billion for more than 800 patents. The math comes out to about $1.3 million per patent, with some being valued more than others.
So, the Nokia/Vringo deal works out to $44,000 per patent or $201,835 per U.S. patent. For the 31 essential patents (here, under "ESSENTIAL CELLULAR PATENTS" at the bottom) that works out to $709,677 per patent. Those calculations don't include the royalty fee mentioned above.
Given the above information, is Research In Motion still overvalued, even though its market cap has fallen to about $4.2 billion? (NOTE: It is challenging to draw a direct correlation from the above information without specific details of the patents sold and what is in RIM's portfolio. We understand this, it's just an observation.)
Shares of RIM are up 4.7 percent on the session, following IBM chatter earlier.
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