Ericsson Said to Weigh Entering Contest for Nortel Patents

May 17, 2011, 1:20 PM EDT By Olga Kharif and Hugo Miller

(Updates with analyst’s comments in ninth paragraph.)

May 17 (Bloomberg) -- Ericsson AB is considering an offer for some of the patents being auctioned off by Nortel Networks Corp., increasing the number of potential bidders to at least four, said two people familiar with the plans.

Ericsson hasn’t made a final decision on whether to make an offer or which patents it’s most interested in, said the people, who wouldn’t be identified because the company’s plans aren’t yet public. The Stockholm-based company is considering teaming up with another company on the bid, and has approached Google Inc., Microsoft Corp. and Intel Corp., one of the people said.

Nortel, a Canadian phone-equipment maker that filed for bankruptcy in January 2009, has already attracted several potential bidders for its portfolio of wireless and technology patents. Google, whose Android software runs phones made by Motorola Mobility Holdings Inc. and Samsung Electronics Co., offered $900 million last month in what Nortel said was a starting point for an auction.

RPX Corp., a San Francisco-based patent-buying firm, is considering a bid, an attorney for the company said this month. Research In Motion Ltd. is also weighing an offer, two people familiar with the company’s plans said last month.

The growing interest may boost the price for Nortel’s patents to more than $1 billion, said Rich Ehrlickman, president of Boca Raton, Florida-based patent broker IPOfferings.

Patent Portfolio

Ericsson “absolutely” makes sense as a bidder since it would give the company patents key to expanding in the U.S., said Ehrlickman. “The bigger question Ericsson faces is does it want to go it alone or join a consortium given the cost and magnitude of those patents.”

“Ericsson has a large patent portfolio and is always looking to expand it,” said Patricia MacLean, a spokeswoman for Ericsson in Canada. She declined to comment further.

Aaron Zamost, a Google spokesman, and Chuck Malloy, a spokesman for Intel, said they don’t comment on rumors. Leonardo Ortiz Villacorta, director of corporate communications for Microsoft, said the company has royalty-free rights to all Nortel patents because of a 2006 cross-licensing agreement, and wouldn’t elaborate further.

The Nortel patents cover telecommunications technology, used in wireless handsets and networks, as well as Internet search, semiconductors and social networking. Specific patents on new touchscreen and conferencing technologies help to explain what has attracted such a range of companies, said Akshay Sharma, an analyst with Gartner Inc.

Value of Patents

The patents may also help protect companies in legal disputes or generate licensing revenue, said Sharma.

Google may want the patents to protect mobile-phone makers that use the Android operating system, after companies such as Apple Inc. have sued several of them alleging patent violations.

Ericsson fell 3.05 kronor, or 3.2 percent, to 93.20 kronor today in Stockholm trading. The stock has climbed 19 percent this year.

Ericsson is most interested in the non-telecom-related patents, and may split up the portfolio with another company that wants the phone patents, said one person familiar with the company’s plans.

Ericsson may have approached Google to try and negotiate a side deal that would allow it to buy some patents from the Mountain View, California-based company, while allowing Google to retain licenses for the patents, said Ehrlickman.

Ericsson has outbid rivals for Nortel assets in the past. The Swedish company acquired Nortel’s wireless equipment business in 2009 for $1.13 billion after six rounds of bidding that included Nokia Siemens Networks and MatlinPatterson Global Advisers LLC.

--Editors: Peter Elstrom, Ville Heiskanen

To contact the reporters on this story: Olga Kharif in Portland, Oregon, at okharif@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net.

To contact the editors responsible for this story: Tom Giles at tgiles@bloomberg.net; Peter Elstrom at pelstrom@bloomberg.net.

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