Nokia Corporation (NYSE:NOK) struck a deal with Samsung resolving their lengthy patent dispute. However, investors appeared unsatisfied with the financial terms of the agreement. Their anger was evident as the stock price was down more than 11% in premarket trading this morning. The deal increases sales revenue from the patent unit to approximately $1.1 billion or €1.02 billion, up from €578 million. This included catch-up payments.
As far as Nokia was concerned, the patent business was a small part of its strategy following the planned takeover of Alcatel Lucent SA (NYSE:ALU). The takeover deal was worth about €15.6 billion.
As a result of the latest deal with Samsung, the patent unit’s run-rate is currently pegged around €800 million on an annualized basis. This was lower than the average analysts’ expectations of €900 million. Some believe that the agreement does not reflect the expectations that Nokia would be able to make more money from its patent portfolio. This is in comparison with its rival Ericsson (NASDAQ:ERIC), which has a run-rate of approximately €1.2 billion with Apple.
Nokia indicated that it expects to get a minimum of €1.3 billion in cash between 2016 and 2018 due to the settlement ad ongoing arbitration. The company has a similar dispute with another Korean firm, LG Electronics. Nokia is also said to be ready to commence negotiations with Apple in upcoming years.
A few years ago, Nokia divested its phone making business to Microsoft Corporation (NASDAQ:MSFT). As a result, the company is now focused on network equipment and retained a big handset patents portfolio.