Icahn urges Motorola to shop patent portfolio

NEW YORK Thu Jul 21, 2011 6:05pm EDT

The Motorola PHOTON 4G Summer (L) and the Motorola TRIUMPH Virgin Mobile Summer mobile phones are seen during their launch in New York June 9, 2011 REUTERS/Andrew Kelly

The Motorola PHOTON 4G Summer (L) and the Motorola TRIUMPH Virgin Mobile Summer mobile phones are seen during their launch in New York June 9, 2011

Credit: Reuters/Andrew Kelly

NEW YORK (Reuters) - Billionaire investor Carl Icahn urged Motorola to shop around its patent portfolio to cash in on interest in wireless technology from companies like Google Inc and Apple Inc.

Shares of Motorola Mobility Holdings Inc rose as much as 23 percent on Thursday as investors bet on a high valuation for the patents, after a hotly contested Nortel patent auction fetched $4.5 billion in early July.

Shares of InterDigital Inc, another big wireless patent holder, have gained nearly 80 percent since it said it would review its options this week.

Icahn, Motorola's biggest shareholder with an 11.36 percent stake, started talks with the company on Wednesday about exploring "alternatives regarding its patent portfolio to enhance shareholder value," according to regulatory filing.

He did not suggest specific options but said "there may be multiple ways" to realize more value from the patents.

He said that Motorola's patent portfolio is substantially larger than the 6,000 patents Nortel sold to a group including Apple, Microsoft and Research in Motion Ltd that outbid Google.

Motorola said it always reviews its options, but declined to give specifics.

The company, which holds 17,000 approved patents and has another 7,500 pending approval, said its ability to develop innovative products and grow revenue is in part attributed "to the fact that it has one of the strongest and most respected patent portfolios in the industry."

Technology companies hold patents to force rivals to pay fees for using their technology or to form cross-licensing agreements. One analyst questioned whether a large patent sale made sense for Motorola, despite Icahn's move.

"He'll be in management's ear. I don't know that he's pushing for a sale of core patents or a revamped licensing program or the sale of some patents," Avian Securities analyst Matthew Thornton said. "It's good news. It draws attention to a valuable asset."

Shares of Motorola closed up 12.4 percent on Thursday, boosting its market capitalization to about $7.4 billion.

OPPORTUNITY FOR GOOGLE?

Icahn became an investor in Motorola Inc after the company's business started to go downhill in 2006 as its phones became less popular. He criticized management at the time and pushed for a breakup of the company to improve its valuation.

Motorola has since hired a new chief executive and split off Motorola Solutions Inc at the start of this year.

A major sale of patents would reduce Motorola Mobility to largely a hardware maker, since its smartphones run on Google's Android software.

Icahn did not cite any parties that might be interested in Motorola's patents, though Google is expected to be interested in buying wireless patents because some experts say it has a weak IP portfolio.

Google could strike a deal with Motorola to use the handset maker's patent portfolio to protect Android phone makers from lawsuits from rivals. Apple has sued Samsung Electronics Co and HTC Corp for patent infringement.

"They're likely already receiving a lot of revenue from their patents," said Morgan Keegan analyst Tavis McCourt. "It's unclear what they can do to create more value from the patent portfolio ... without just selling the company."

ThinkEquity analyst Mark McKechnie said Motorola deserves a higher valuation because of its wireless patents.

Motorola shares closed $2.78, or 12 percent higher, at $25.19 on the New York Stock Exchange. The rose as high as $27.68 after the Icahn comments. \

(Editing by Richard Chang, Tiffany Wu and Robert MacMillan)