announced that it had reached a settlement with Apple under which Apple would be granted to all of Ericsson's standard-essential patents, as well as to certain other patent rights (which are not named). We've often reported on these patents on this blog and my fellow contributor Keith Mallinson has studied them extensively and their effect on competition.
The Apple settlement will apparently boost Ericsson's revenue from licensing of intellectual property rights in 2015 to SEK 13-14 b (around USD 1.5 billion) compared to 2014's revenue of SEK 9.9 bn reported here. It's not surprising that Ericsson's share price jumped yesterday from Friday's closing price of USD 9.12 to USD 9.62 at 09.50 Eastern time after announcement and closed today (Tuesday) at USD 9.56. Apple's price did not change much during the same period.
It's clear that licensing revenue is becoming a significant contributor to Ericsson's bottom line. In 2014 operating income was reported to be SEK 11.1 Bn, which included a payment from Samsung for an IPR licence of SEK 2.1 Bn. The amount paid by Apple remains confidential and will include an ongoing royalty (as does the Samsung agreement) and so there will be further contributions to Ericsson's bottom line over the next few years.
The European Commission, among other organisations, have been concerned that the smartphone patent wars damage competition, as reported in the Financial Times. The Apple/Ericsson agreement show how patent can work - Ericsson receive additional revenue for their work on the development of telecommunication standards and Apple pay for access to this technology.
A report on key investing.com suggests that Apple would bring in SEK 3.6 Bn with SEK 0.5 Bn in legal fees. The agreement could books Ericsson's operating profit in 2015 by 13% and by 10% in 2016.
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