Samsung to pay Ericsson $650m, royalties

                                  

Samsung Electronics Company will pay Ericsson $650m along with years of royalties to end a technology license spat, the Swedish company said on Monday. The world’s number one mobile network equipment maker sued Samsung in 2012 on the grounds that the Korean firm had infringed patents involving technology for clearer voice transmission, touchscreen functions and network efficiency, according to Reuters.

The smartphone and tablet maker, which is increasingly active in network equipment, made a counter claim.

The initial payment will lift fourth-quarter sales by 4.2 billion Swedish crowns ($652m) and net income by 3.3 billion, Ericsson said in a statement.

Analysts in a Reuters poll had forecast fourth quarter net sales of 65.1 billion crowns and net income of 4 billion.

Ericsson declined to give further details of the agreement or what royalties Samsung would pay, but its shares rose 2.4 per cent as markets anticipated billions of crowns of extra revenue for the Swedish firm for years to come.

Ericsson’s Chief Intellectual Property Officer, Kasim Alfalahi, would not say how long the agreement with Samsung was, but said patent agreements generally cover four to seven years.

“Ericsson’s settlement with Samsung is going to be an important future driver of its earnings,” JP Morgan analyst, Rod Hall, said in a note, adding that, “The ongoing revenue could be approx 2.1 billion Swedish crowns annually and, with these revenues having 70 percent ongoing margin, they could add 5.4 per cent to 2014 EPS.”

Bernstein analyst, Pierre Ferragu, estimated annual revenues from the royalties at 1.7 billion crowns.

Ericsson shares rose 2.2 per cent by 1244 GMT, outperforming European technology stocks which were up 0.8 per cent. Shares in Samsung, which declined to comment, fell 1.2 per cent.

Patent infringement suits have become frequent in high-tech industries such as telecoms in recent years.

While equipment such as handsets share much of their technology, forcing rivals to take out licenses from one another, companies are also desperate to protect any advantages they have and maximise incomes that are under pressure from fierce competition, leaving plenty of room for dispute.

Samsung is also embroiled in a legal battle with Apple in several countries, with Apple alleging various Samsung products infringed its patents.

The Korean firm signed a licensing deal with Ericsson in 2001 covering handset and network patents and renewed that deal in 2007.

However, the two could not agree terms in 2011 when the deal ran out, with Samsung accusing Ericsson of demanding prohibitively higher royalty rates to renew the same patent portfolio.

 Source: Punch