deal to sell Microsoft over $1 billion in patents only intensifies the war for patent portfolios, potentially benefitting companies like Research In Motion and InterDigital.
With the patent market hot again, (Yahoo! recently sued Facebookover patent infringement), AOL’s lucrative sale could have a broader impact.
Miller Tabak analyst David Joyce, for example, notes that the Internet patent market is “increasingly strong,” as competition for key technologies increases. Joyced upped his price target on AOL to $30, and kept his “buy” rating.
AOL’s patents were thought to be worth around $300 million, according to Benchmark analyst Clayton Moran.
“We believe most on the Street viewed $300 million as the likely maximum value. Relative to this expectation, AOL has created $7.63 per share in stock value,” Moran wrote, in a research note. The analyst rates AOL “hold” and upped his price target to $28 from $18.
The intensifying patent market could therefore be a boon for companies like InterDigital , which tried to sell its patent portfolio throughout 2011 to unlock value. Ultimately, however, InterDigital did not receive the price it wanted for its portfolio, and pulled the sale. The wireless specialist was hoping to receive as much as $3 billion for its patents, according to reports by The New York Times.
Research In Motion , like InterDigital, could also benefit from the intellectual property feeding frenzy. Omega Advisors’ Leon Cooperman, for example, purchased a significant stake (1.4 million shares) in Research In Motion, not only because of the company's turnaround potential, but also because of its patents. “There is tremendous intellectual property...” at RIM, Cooperman said.
Here is the rest of Leon Cooperman’s portfolio:
Microsoft’s acquisition comes after some prominent intellectual property deals. Google, for example, purchased Motorola Mobility for its patents. The Google/Motorola Mobility deal came after a consortium of technology companies, including Apple, Research In Motion, and the aforementioned Microsoft , purchased patents from Nortelfor $4.5 billion.
AOL sold 800 patents to Microsoft in exchange for $1.056 billion in cash. Most of the cash will be returned to shareholders, but AOL has not yet said how it will do so.
Additional Views: Barclays Raises AOL Price Target to $27
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