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IBM's Secret Weapon

When a company rakes in around $100 billion annually, and nets more than $10 billion, rapid growth usually isn't in its cards. But its powerful portfolio of patents gives massive IBM's (NYSE: IBM  ) growth prospects an extra boost.

The folks at Forbes examine patent grants each year, listing the most patented U.S. companies. In 2009, the top ranking went to IBM, with 4,914 U.S. patents granted. Even more impressively, IBM has held that berth for 17 years in a row. The No. 2 company, Microsoft (Nasdaq: MSFT  ) , collected just 2,906.

Here are the corporate world's premiere patent princes:

Company

2009 Patents Granted

Profit per Patent

IBM

4,914

$2.7 million

Microsoft

2,906

$5.6 million

Intel (Nasdaq: INTC  )

1,537

$2.8 million

Hewlett-Packard (NYSE: HPQ  )

1,237

$6.3 million

General Electric (NYSE: GE  )

979

$11.3 million

Micron Technology (NYSE: MU  )

966

($1.0 million)

Cisco Systems (Nasdaq: CSCO  )

913

$6.6 million

Data: Forbes.

Note that when it comes to patents, the value of your discoveries is more important than the sheer amount of them. IBM does well on profit per patent, but some of the list's other members are even more productive.

Patents significantly boost a company's growth potential by improving products or opening entirely new lines of business. Innovation is crucial to success; even monolithic Wal-Mart is trying new, smaller store designs for city sites. And it's hard to imagine Apple having gotten anywhere impressive without developing major innovations such as the iPhone, iPod, and iPad.

In IBM's case, the company "invests $6 billion a year in research and development including eight pure research labs around the world where scientists work on projects unconnected to any specific business proposal," according to Forbes. IBM knows that it needs to evolve to stay competitive; patents help protect all of those new discoveries.

Investors should keep a close eye on patent-rich powerhouses such as IBM. A plethora of patents not only promises a steady stream of future profits, but also signals that a company is staying on its toes and investing in its future.

The most innovative companies can deliver revolutionary results.

Intel, Microsoft, and Wal-Mart Stores are Motley Fool Inside Value selections. Apple is a Motley Fool Stock Advisor pick. Motley Fool Options has recommended buying calls on Intel and a diagonal call position on Microsoft. The Fool owns shares of Intel. Try any of our investing newsletter services free for 30 days.

Longtime Fool contributor Selena Maranjian owns shares of General Electric, Apple, Wal-Mart, and Microsoft. The Motley Fool is Fools writing for Fools.


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