* Initial payment to lift Q4 sales by 4.2 bln Swedish crowns
* Net income to get boost of 3.3 bln crowns
* Analysts expect royalty payments for several years to come
By Simon Johnson
STOCKHOLM, Jan 27 Samsung Electronics Co
will pay Ericsson $650 million along
with years of royalties to end a technology licence spat, the
Swedish company said on Monday.
The world's No. 1 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.
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 ($652 million) 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 4.0 billion.
Ericsson declined to give further details of the agreement
or what royalties Samsung would pay, but its shares rose 2.4
percent by 1123 GMT as markets anticipated billions of crowns of
extra revenue for the Swedish firm for years to come.
Kasim Alfalahi, Ericsson's Chief Intellectual Property
Officer, 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.
"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 percent to 2014 EPS."
Bernstein analyst Pierre Ferragu estimated annual revenues
from the royalties at 1.7 billion crowns.
Ericsson shares rose 2.2 percent by 1244 GMT, outperforming
European technology stocks which were up 0.8 percent.
Shares in Samsung, which declined to comment, fell 1.2 percent.
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 licences 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
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
"This agreement allows us to continue to focus on bringing
new technology to the global market and provides an incentive to
other innovators to share their own ideas," Alfalahi said.
Ericsson, which invests about 30 billion crowns annually in
research and development, has over 33,000 patents covering key
technology for 2G, 3G and 4G networks and handsets. It has more
than 100 licence agreements with major players in the industry.
Samsung said on Sunday it had signed a cross-licensing
agreement with Google and signed a licence deal with
Nokia in November last year.