The patents are worth billions. What's the justification for holding on to them?

So, fellow armchair CEO's, our company owns billions of dollars worth of cellphone patents. The purpose of holding on to them is to defend our mobile phone business from patent claims from other smartphone companies, right? It's kind of a mutually assured destruction thing - you sue us and we will sue you right back in a bigger way.

So if we are just hoping to break even or make a small profit on smartphones, how can we justify holding on to these patents to achieve that? What's the opportunity cost of not selling them when we could get billions for them and invest in the more profitable part of the business that we are growing?

Remember that dismissing an rebutting and argument are two different things. No credit for dismissing ;)

If they sold off their patents, they will have to pay licensing fees to use those things in their products. I'm guessing many of the patents they hold are for technology used in their products.

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Originally Posted by irwindersra

If they sold off their patents, then they will have to pay licensing fees to use those things in their phones. I'm guessing many of the patents they hold are for technology used in their products.

Grade: Incomplete

Then they are still being used to support the marginally profitable smartphone business. I'm talking about selling the patents and getting out of smartphones. The opportunity cost of $2B in patents is probably $100-200M per year (5-10% return on capital). Anything less and you should return the $2B to your shareholders so that they can invest it elsewhere.

Patents are worth what someone will pay for them. And we just don't know how much of those deal with only hardware, compared to patents that might be more of other products like BBM, BES.... There is "value" there, but not nearly what it was a few years ago.

The important thing is Services are still tied to hardware. If BlackBerry stopped making hardware, they lose half of their revenues and there is a good chance that revenues on services has not hit bottom yet, especially if hardware went away.

Before Chen gets rid of one product he needs another to replace it.... he is working on that, but he isn't ready yet.

Originally Posted by early2bed

Grade: Incomplete

Then they are still being used to support the marginally profitable smartphone business. I'm talking about selling the patents and getting out of smartphones. The opportunity cost of $2B in patents is probably $100-200M per year (5-10% return on capital). Anything less and you should return the $2B to your shareholders so that they can invest it elsewhere.

Shareholders..... :rolleyes:

If BlackBerry were to sell the patents, I bet FairFax is first on the list to get back their $1.2 Billion. The rest would go towards a transition to a services/software company.

Shareholders would see the same dividend on a sale of Patents as they did on most all of BlackBerry's other physical assets.

Our? We? :rotfl:

They could sell them off and still cross-license them, Google did this when the sold Moto to Lenovo, each got some of the patents and then cross-licensed them to each other. BB is perhaps negotiating this with Samsung since Sammy wants to go in big into consumer IoT they'll need protection which QNX/BB patents may provide.

Originally Posted by scalemaster34

Patents are worth what someone will pay for them. And we just don't know how much of those deal with only hardware, compared to patents that might be more of other products like BBM, BES.... There is "value" there, but not nearly what it was a few years ago.

The important thing is Services are still tied to hardware. If BlackBerry stopped making hardware, they lose half of their revenues and there is a good chance that revenues on services has not hit bottom yet, especially if hardware went away.

Before Chen gets rid of one product he needs another to replace it.... he is working on that, but he isn't ready yet.

Grade: A

I like this answer a lot. This means an activist shareholder could easily come in and buy these $10 shares and put some pressure on the Prem Watsa clan to extract the value from these assets.

If BlackBerry were to sell the patents, I bet FairFax is first on the list to get back their $1.2 Billion. The rest would go towards a transition to a services/software company.

As long as Blackberry can demonstrate an increase in shareholder value such as decreased debt or productive investment in the service company it should benefit the average shareholder. The point is that keeping the patents has an opportunity cost which means that breaking even on hardware isn't really breaking even.

Originally Posted by bungaboy

Our? We? :rotfl:

This is the Armchair CEO forum, isn't it? It's what we would do if we were CEO.

http://imgc-cn.artprintimages.com/im...lue-for-sh.jpg

"Yes, the planet got destroyed. But for a beautiful moment in time we created a lot of value for shareholders."

Originally Posted by early2bed

So, fellow armchair CEO's, our company owns billions of dollars worth of cellphone patents. The purpose of holding on to them is to defend our mobile phone business from patent claims from other smartphone companies, right? It's kind of a mutually assured destruction thing - you sue us and we will sue you right back in a bigger way.

So if we are just hoping to break even or make a small profit on smartphones, how can we justify holding on to these patents to achieve that? What's the opportunity cost of not selling them when we could get billions for them and invest in the more profitable part of the business that we are growing?

Remember that dismissing an rebutting and argument are two different things. No credit for dismissing ;)

WRONG: Patents do not defend against claims from other companies, they only enable the patentholder to assert claims against another entity for making the patented article. Blackberry's patents would be of no use if they, for example, copied a Samsung phone. The folks who stated that BBRY still makes products protected by their own patents got it right.

docfreed
Licensed Patent Agent

What's something worth ? Whatever some one is willing to pay.

Patients are no different, their relative value is purely subjective until transacted. Recently we've seen some large patient transactions and several high profile lawsuits. These are the primary sources for deriving a value of intellectual properties for any organization and causes many heated discussions between auditors and the company management. Obviously, a company wants to show more asset value, as it goes directly to the value of the company and its shares.

Like some others have said, if Blackberry was to sell off it's patients, a significant portion of the proceeds would be allocated to "other interested parties", while the stock value would be severely impacted. I might even say that without the patients Blackberry could become a penny stock.

Originally Posted by early2bed

Grade: A

I like this answer a lot. This means an activist shareholder could easily come in and buy these $10 shares and put some pressure on the Prem Watsa clan to extract the value from these assets.



As long as Blackberry can demonstrate an increase in shareholder value such as decreased debt or productive investment in the service company it should benefit the average shareholder. The point is that keeping the patents has an opportunity cost which means that breaking even on hardware isn't really breaking even.

But would selling patents increase the "value" of BlackBerry and thus the value of the shares? I think most investors would see this as a negative move which would drive down the stock price, and thus decreasing the value.

As I said, companies don't sell assets and then distribute those "dividends" to shareholders. Only time I've seen that is after a bankruptcy, and again the creditors are first in line to get their due.

OP, what do you think the market value of BlackBerry today is composed of? Probably 90% of the market value is the value of the patents. So yeah, if they are thinking of liquidating the company, they can sell the patents.

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Originally Posted by bobshine

OP, what do you think the market value of BlackBerry today is composed of? Probably 90% of the market value is the value of the patents. So yeah, if they are thinking of liquidating the company, they can sell the patents.

If they are primarily going to be making their profit on services as is assumed then why do they need to hang on to billions of dollars worth of smartphone patents?

The cash from the patents does not have to be distributed to shareholders as dividends. If used to grow the services business then it will increase shareholder value.

Originally Posted by early2bed

If they are primarily going to be making their profit on services as is assumed then why do they need to hang on to billions of dollars worth of smartphone patents?

The cash from the patents does not have to be distributed to shareholders as dividends. If used to grow the services business then it will increase shareholder value.

Right now they aren't a Services only company... and there currently is no indication that they have products that could replace the revenues that hardware brings in.

And simply we don't the breakdown on the patents.... many that might have been worth millions a few years ago are worthless today because of changes in technology or the reduction in patent litigation. Many of BlackBerry patents have to do with designs like Surepress and QWERTY keyboard... not a whole lot of demand for those anymore. I bet that many of BlackBerry's more valuable patents have more to do with software and services functions than with hardware...

And what would the message be if BlackBerry started selling off patents? I can't think of too many companies that started selling off patents in mass... that weren't Bankrupt. It's an act of last resort.... if you are a shareholder when they start selling patents, you stayed in too long.

Originally Posted by early2bed

If they are primarily going to be making their profit on services as is assumed then why do they need to hang on to billions of dollars worth of smartphone patents?

The cash from the patents does not have to be distributed to shareholders as dividends. If used to grow the services business then it will increase shareholder value.

But they aren't breaking even on service revenu yet! If they spin off the patents, BBRY will be worthless and be an easy takeover prey

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Originally Posted by bobshine

OP, what do you think the market value of BlackBerry today is composed of? Probably 90% of the market value is the value of the patents. So yeah, if they are thinking of liquidating the company, they can sell the patents.

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What about the cash?
That alone still is a fair share of the share price... ! :-)

�   Telstra + Classic, Optus + PP, AT&T + PP , Verizon + Classic... why the mix, Mr. Fix?   �

The purpose of a publicly traded company isn't to store cash for shareholders. You don't need to buy stock for that. Companies are supposed to use their assets to generate excess returns for shareholders. I'm simply asking what returns these valuable smartphone patents are generating if the hardware business is just going to be breaking even.

Originally Posted by Prem WatsApp

What about the cash?
That alone still is a fair share of the share price... ! :-)

•   Telstra + Classic, Optus + PP, AT&T + PP , Verizon + Classic... why the mix, Mr. Fix?   •

Go look at the financial statement... a big portion of the "cash" is already spent.

Then how much of it is "invested" and may not be convertible to CASH anytime soon... if ever. Some investments work out, and sometimes they don't.

Maybe they have a billion in actual cash.... or maybe they only have a few hundred thousand. Either way the "CASH" doesn't equal current share prices.

Most likely a shortage in cash is one of the reasons that devices are being produced at such a slow rate.

I am CEO you say? I believe maintaining control of a whole ecosystem of hardware designs, mobile OS, server OS and app store and media store is vital to overall success: patents support all of those things. If the patents were sold they would be licensed to anyone: they have no value unless someone is going to license them: there are some patents I don't want to license and therefore I don't sell my patents.

If you were CEO you might have a different idea, but I'M CEO so I say that the product and service portfolio as a whole is vital to success, and to divest any line of business would undermine the long-term strategy and drive the company to complete distruction.

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Originally Posted by RyanGermann

If you were CEO you might have a different idea, but I'M CEO so I say that the product and service portfolio as a whole is vital to success, and to divest any line of business would undermine the long-term strategy and drive the company to complete distruction.

As CEO, you still have to justify your use of assets to shareholders. Otherwise, your share price may remain in the doldrums. For example: BBRY

Don't they generate revenue? Other companies currently pay BlackBerry to license these patents correct? If they sold them they might get cash now, but probably loose money in the long run.

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Originally Posted by early2bed

As CEO, you still have to justify your use of assets to shareholders. Otherwise, your share price may remain in the doldrums. For example: BBRY

if the only way to prove my strategy is good or bad is to abandon it and see if a different strategy fails or succeeds, then the board has to tell the CEO what they want and then I as CEO decide to either execute that strategy, or I resign. It is not true that there is measurable data for every contingency and sometimes it depends on secret information held by competitors i.e. if BlackBerry's PKB patents are licensed by Apple or of they are not, the outcome is very different.

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Patents often have more of "potential" value than a real value. They can be worth lots, or be worthless. You impart value onto them by either building a service/product that generates revenue and is covered by the patent, or... someone else does and you enforce it (sue them, license it to them, assign (sell) the patent to them, etc).

If BlackBerry only generates $10M on their hardware keyboard business,.. then that's as much as those patents are worth (just don't ask Typo). If they stop making keyboards (or devices altogether),.. then all those hardware patents could very well become worthless overnight since it's clear that the vast majority of handsets will not be adopting any of BlackBerry's hardware features.

They have lots of current encryption technology, which is what generates current licensing fees and is actually of some value regardless of BlackBerry's state,.. and fancy future encryption technology,.. which will only be worth anything if it actually becomes broadly adopted. If they stop development, then it's likely the potential value of the latter will never be realized,..

So yeah... if you need quick cash, it's definitely easier to sell a bunch of office buildings.



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