Nokia Scores a Hollow Victory

"This is the way the world ends
This is the way the world ends
This is the way the world ends
Not with a bang but a whimper."

-- T.S. Eliot, "The Hollow Men," 1925

That's how Apple (Nasdaq: AAPL  ) and Nokia (NYSE: NOK  ) ended their nearly two-year-old web of crosswise lawsuits -- with an anticlimactic settlement.

The conflict escalated to the high heavens, and Nokia ended up with as many as 46 patents involved in multiple suits on both sides of the Atlantic. A case like that can take years to unravel. Appeals and countersuits are the filibusters of the legal world.

But an early settlement has put a lid on all of these actions. The financial terms of the settlement were not disclosed, though Nokia expects it to have a positive effect on the next quarter. Apple is sending some cash to Finland, followed by regularly scheduled license royalties for a few years.

That's a far less dramatic outcome than the halted sales of iPhones that Nokia asked for, and less damaging to the patent system than an outright Apple victory that calls those 46 patents into question. I was convinced that Nokia CEO and former Microsoft executive Stephen Elop would burn every ounce of available gunpowder to reach a more drastic outcome, but it was not to be.

Perhaps Nokia simply decided to get something while the getting was good, then focus on rebuilding its badly damaged handset business. Moreover, Nokia might take this partial victory and go looking for other smartphone builders who should pay up for their use of these patents. Hey, any extra revenue helps.

Patent expert Florian Mueller sees the Finns chasing down Android builders such as Samsung, HTC, and Motorola Mobility (NYSE: MMI  ) next, given how similar that platform is to Apple's iPhone template. "So from a competitive point of view, I don't think Apple loses much," writes Mueller. "On the bottom line its profitability may even benefit from this because Apple's margins face no greater threat than Android-style commoditization of smartphone technologies."

From there, Research In Motion (Nasdaq: RIMM  ) shouldn't be far down Nokia's hitlist. Microsoft is obviously safe, or else Nokia's massive commitment to Windows-based smartphones wouldn't be worth much. And I'm not sure if Hewlett-Packard (NYSE: HPQ  ) and its Palm-based trickle of mobile products would even be worth the trouble. So it's next stop, Androidville.

That's the end of that big-time tussle. I think Nokia won, but it's a minor victory. What's your view? Drop down to the comments box below to share your thoughts.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. The Motley Fool owns shares of Microsoft and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple and a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


Read/Post Comments (5) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 14, 2011, at 2:13 PM, ionthemarket wrote:

    The Nokia settlement will have very little impact on the momentum that Apple has. I think in the short term there might be some drop in Apple's stock price but that will be just a dip in the road. Here is a good technical chart on Apple. Time to buy?

    http://www.moneyshow.com/image.asp?imgSrc=DailyCharts/charts...

  • Report this Comment On June 14, 2011, at 2:21 PM, marv08 wrote:

    Right, it is a minor victory. Especially since Nokia's original demand was to receive over-the-top royalties and cross-licensing of iOS technologies for industry-standard patents (those absolutely needed to do anything in telecommunications) which have to be licensed under FRAND terms.

    If the rumored terms of 1% licensing fees and NO licensing of iOS technologies from Apple are true, then they have not got much more than Apple was willing to pay anyhow.

    The biggest positive for Nokia is the one-time payment for iPhones sold until today. This should allow them to finish the current quarter with a black number. But with billions of restructuring charges ahead of them, this is just delaying a fat red number for another three months.

  • Report this Comment On June 14, 2011, at 3:19 PM, thethreestooges wrote:

    shallow, bottom, minor, no impact....whatever. Are you angry as NOK holder because selling iPhone not halted? Or are you angry as AAPL holders because you just want to kick someone while he is on the ground??

  • Report this Comment On June 14, 2011, at 7:14 PM, lecorb63 wrote:

    IS HARD TO KNOW. HOW MUCH MONEY IS IN THE MIDDLE? Anyone know? EXPECT THE BEST IS, NO ONE HAS A CRYSTAL BALL OR THE MORNING JOURNAL

    BEST REGARDS.

  • Report this Comment On June 15, 2011, at 1:24 AM, bhspitbull wrote:

    I am surprised by the degree to which the stock has moved today and aftermarket in response to the settlement news. Even though it will help them into the black for a quarter, it seems somewhat artificial to me; it's not a big help to their position in this highly competitive market.

    Especially in tech companies I like to see innovation and must-have products. Suing competitors doesn't seem like a viable long-term business model. We'll see what Nokia and Microsoft come up with, but until I see something that makes me want to get up and buy their phone, I am somewhat skeptical.

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