Apple Makes Up With Nokia

I Stock 517335694

By: R. Scott Raynovich

Suddenly Apple and Nokia are best friends. Cupertino-based Apple settled a short but bitter patent lawsuit with Finland-based Nokia, according to a joint statement released today. In a double upside for Nokia, Apple also agreed to do more business with the communications equipment supplier.

Exact terms of the deal were not disclosed, but the companies did say it means Nokia will get an upfront catchup payment as well as additional royalties based on revenue in the future. The two companies also announced increased cooperation, with Nokia providing "certain network infrastructure product and services to Apple."

The two companies will also partner on digital health, with Apple selling Nokia's health products. Apple pulled Nokia health products -- which it had acquired through the acquisition of French company Withings -- after Nokia filed the patent lawsuit. Nokia sees digital health as a key growth opportunity.

"This agreement will strengthen our collaboration," said Basil Alwan, President of Nokia's IP/Optical Networks business. "We look forward to supporting Apple."

The dispute's resolution was notable in its speed -- it originated in late 2016. That is unusual for technology patent disputes, which can last for years. As an example, Cisco's lawsuit against Arista Networks is ongoing. And Apple took five years to settle a lawsuit it had filed against Samsung.

Nokia had not expected a resolution in 2017. Investors responded by boosting its stock price by 5 percent today.

Analysts said the overall impact was hard to quantify. But there's no doubt that it's a positive development for Nokia, which has been weighted down by flat to declining numbers in the communications equipment business.

"We are not changing our estimates at this time; however, we view this agreement as positive for Nokia due to the recurring, high margin elements of its patent license business, while also lifting the headwinds associated with a lengthy legal process," wrote Rayond James analyst Simon Leopold in a note to clients issued today. "The June quarter will include catchup payments and forward payments that we expect exceed €100 million by our estimate."

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