What About AlcaLu's Patents?
Granted, the winning bid for Nortel's remaining patents, as announced Thursday night, might have been bumped upwards by fear. The six companies that allied for the bid were keeping the patents out of the hands of Google (Nasdaq: GOOG) and Huawei Technologies Co. Ltd. And they had to battle back against tactics such as Google's reported bid of, essentially, "pi" billion. (See Nortel Sells Patents for $4.5B.)
But $4.5 billion was a lot more than expected. What if you interpret Thursday's results as a sign that mobile-networking patents are more valuable than they're given credit for?
Simon Leopold, an analyst with Morgan Keegan & Company Inc. , took that idea and ran some calculations on Alcatel-Lucent (NYSE: ALU), which of course owns the former Bell Labs.
"Patents can be valuable, and we argue that the market has not reflected this," Leopold wrote in a note published Friday.
Now, this is a thought exercise, so bear with us. AlcaLu's patent stash numbers around 27,000, so if you assume every patent in the world is equally valued (yes, we know! let it go!), Nortel's $4.5 billion sale implies AlcaLu is sitting on more than $20 billion in patents.
AlcaLu's total valuation is more like $13 billion, so obviously, the market isn't thinking this way.
What if we just assume AlcaLu's patents are worth $4.5 billion -- an enormous discount to the price Nortel got -- and tack that onto today's valuation? You come up with a new valuation of around $7.91 per share, Leopold calculates -- and that's still well off from the $9.54-per-share that he thinks is reasonable.
Bottom line: Patents do have value, and Leopold suspects that AlcaLu's aren't given enough credit.
Leopold's note also took a look at Motorola Mobility LLC , which owns around 24,000 patents. He noted that if they're half as valuable as Nortel's, then they're worth about $7 per share, for a company trading at $23 per share. — Craig Matsumoto, West Coast Editor, Light Reading