Microsoft and South Korea's LG Electronics said on Thursday they have entered into a patent cross-license agreement, sending LG shares to their highest in more than a year.
The agreement, whose financial terms were not disclosed, could help bring in additional revenue for LG Electronics as Microsoft eyes demand for high-data applications while the line between consumer gadgets and PCs blurs.
"I expect the agreement could become a big earnings driver for LG Electronics especially given Microsoft's plans to expand its home networking business in two or three years. It's potentially a huge market," said Cho Sung-eun, an analyst at Mirae Asset Securities.
Analysts also said the deal would positively affect LG's patent negotiations with other technology companies and stem a flurry of patent violation lawsuits common in the industry.
Under the agreement, LG will be able to use Microsoft-patented technology in its products, including Linux-based embedded devices.
Microsoft will have access to LG's patents and will license other patents developed by LG that are now owned by MicroConnect Group.
"This capped four years of negotiations between LG and Microsoft," LG Electronics spokeswoman Judy Pae said in Seoul. "The amount Microsoft pays LG is much bigger than what LG pays Microsoft, but I can't go into financial details."
LG Electronics' shares rose as much as 5.2% to a session high of 74,500 won, its highest since May 2006.