Apple Inc. (AAPL) to Pay Royalty to Nokia Over Patent Settlement
On Tuesday an analyst at Deutsche Bank estimated that Apple Inc. (NASDAQ:AAPL) would be paying out approximately 420 million euro ($608 million) lump-sum payment to Nokia upfront, after a settlement was reached for an ongoing patent litigation suit between the two companies. Based on earlier settlements pertaining to the tech industry, Nokia is expected to receive a 1 percent royalty rate on all iPhones sold through the first quarter — 110 million phones at an average selling price of $550. Ultimately, after the original lump sum paid over to the Finnish company, AAPL will be paying out about $138 million every quarter.
Nokia recently announced its partnership with Microsoft to bring Windows Phone OS to Nokia’s devices. This has caused a dip in Nokia’s smartphone shipments as users are expecting new handsets to be revealed soon.
A report from Japanese analyst house Nomura, said that Nokia was so far behind in terms of sales and production that Apple and Samsung would surpass them in smartphone shipments this quarter. Nokia is under a lot of pressure to make their OS transition quick and painless, so that they can regain lost time and money in the smartphone market. A
pple’s royalty payments to Nokia will certainly help the company as they continue to improve their services and transition to a new operating system. Robert Cozza, mobile devices analyst at Gartner, spoke about Nomura’s predictions:
In 1Q11 Nokia smartphone sales were double those of Samsung, so it seems optimistic to see this overtake in 2Q. If Nokia’s new Symbian devices will fail with consumers over the next couple of quarters then we could see this overtake from Samsung on Nokia happening in 3Q.
At this point, with much speculation and markets analysis, it is unclear where Nokia is headed with their phones and if they will ever be able to capture the market as they once did, but one thing is for sure, royalty payments from Apple will certainly give the Finnish giant a boost.