Apple settled a patent dispute with Nokia and agreed to purchase more of its network services and products. The news sent Nokia shares up 7 percent.
The deal states that Nokia will receive bigger royalties from Apple for using its mobile phone patents, which will help offset the impact of waning demands for its mobile network hardware. Experts noted that they had not been expecting such a fast resolution to the dispute that started back in December.
Apple will resume retail sales of Nokia products following settlement of patent dispute
Nokia announced it will also supply network infrastructure products to Apple, and Apple is expected to continue sales of Nokia’s digital health products in online and retail stores.
Digital health is one of the major areas Finnish company Nokia is focusing, as it tries to develop new businesses to face the industry demand for network equipment. In 2016, Nokia bought Withings S.A., a small firm from France with products like activity trackers and baby monitors constructed on digital platforms.
“There could emerge big future value from this as Apple could become an important distribution channel,” said Daniel Djurberg, an analyst from Handelsbanken who has an accumulate recommendation for Nokia shares, according to Reuters. “I have not given any value so far for Nokia’s digital health business, but might apply an option value to it.”
Nokia shares jumped to its highest since last year after settlement
Nokia Chief Executive Rajeev Suri said that the deal would help expand network sales beyond telecom operators to technology giants and global internet. Suri explained that the deal involves a business collaboration, particularly for areas in IP and optical equipment, a key point for webscale players when they build their data centers.
In the patent deal, it was stated that Nokia receives a “significant” upfront cash payment as well as additional revenues from Apple starting from the current quarter. The company did not disclose the amount, but analysts believe the revenue was likely to be far higher than a previous deal.
Nokia shares, which fell in December when the patent dispute erupted, jumped to their highest since February 2016 and were up 6.7 percent at 5.89 euros by 11:09 a.m ET (15:09 GMT). A previous patent license contract between Apple and Nokia expired last year, which prompted the companies to take legal action in December. Apple claimed that Nokia was overcharging them, and the Finnish company said that Apple was violating technology patents.
Nokia cut its annual run-rate forecast in December, in the absence of a new deal between the companies. Patent and brand licensing sales were set at 800 million euros ($900 million), and in its latest quarterly report released in April, Nokia ceased giving an annual run-rate forecast.
“[The agreement] moves our relationship with Apple from being adversaries in court to business partners,” said Maria Varsellona, Nokia’s Chief Legal Officer, in a statement, according to Reuters.
Nokia’s patents include technology that reduces the need for hardware components in mobile phones, conserves battery life, increases radio reception, and it also helps in recovering lost phones, to name some of its features. The company sold its handset business to Microsoft in 2014, to focus on its network business and mobile patents. Nokia’s sales in 2016 totaled around 24 billion euros.