July 21, 2011 10:08 pm

Icahn sparks Motorola surge with patent proposal

Motorola Mobility’s shares gained more than 12 per cent after Carl Icahn, Motorola’s largest shareholder, urged the US smartphone maker’s management to explore options for its extensive patent portfolio.

Mr Icahn’s move comes shortly after the $4.5bn sale of a portfolio of more than 6,000 wireless patents held by Nortel Networks, the bankrupt Canadian telecom equipment group, to a consortium of technology companies including Apple, Microsoft and Research in Motion.

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That deal, worth more than five times the $900m Google had offered in a stalking horse bid, has drawn attention to the value of patents in the fast changing and increasingly litigious mobile phone industry and suggests that some companies with large patent portfolios could be substantially undervalued.

The scramble to re-evaluate patents in the wake of the Nortel Networks deal has also focused attention on InterDigital, a mobile phone technology designer that some analysts have suggested could now become a takeover target for Google after it lost out in the bidding for the Nortel patent portfolio.

InterDigital’s own shares rose sharply earlier this week after it issued a press release indicating it has retained Evercore Partners and Barclays Capital to assist with a strategic review that could result in a sale of the company.

Mr Icahn disclosed his discussions with Motorola in a Securities and Exchange Commission filing. He said that he had held talks with the Libertyville, Illinois-based company and noted that Motorola’s patent portfolio is “substantially larger” than Nortel’s and includes numerous patents for so-called 4G telecommunication technologies that have “significant” value.

The billionaire Wall Street investor added, “there may be multiple ways to realise such value given the current heightened market demand for intellectual property in the mobile industry.” He did not provide any more details about his proposals.

Motorola Mobility said in response to the filing that the company continuously reviews its strategic direction. But even before the Icahn statement, some analysts were suggesting that Motorola could be undervalued based on its patent holdings and the turnround in its core mobile handset business.

Motorola Mobility, which was spun off from Motorola at the start of this year, responded that it keeps reviewing its options, and that the turnround of its Google Android-based smartphone business is in part due to the 17,000 patents it holds.

Mr Icahn, who holds an 11.36 per cent stake in Motorola Mobility, acquired his initial Motorola stake in 2006 when the company was struggling keep pace with its rivals and lacked competitive 3G handsets. He subsequently pushed for a change in management and the sale of the mobile phone business.

Motorola Mobility’s share price surged $4.48, or 20 per cent, to $26.89 on the New York Stock Exchange after Mr Icahn disclosed his SEC filing before settling back to close $2.78 or 12 per cent higher at $25.19.

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