* Icahn urges Motorola to explore alternatives for patents
* Interest from Google seen high after it lost Nortel sale
* Analysts skeptical Motorola would sell off its patents
* Shares jump, analysts say Motorola undervalued
(Adds Motorola and analyst comment, updates stock, context)
By Sinead Carew
NEW YORK, July 21 Billionaire investor Carl
Icahn urged Motorola (MMI.N) to shop around its patent
portfolio to cash in on interest in wireless technology from
companies like Google Inc (GOOG.O) and Apple Inc (AAPL.O).
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 (IDCC.O), another big wireless
patent holder, have gained nearly 80 percent since it said it
would review its options this week. [ID:nL3E7IJ2AD]
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 (MSFT.O) and Research in Motion Ltd RIM.TO
RIMM.O 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
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 (MSI.N) 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
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
(005930.KS) and HTC Corp (2498.TW) 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)