Nokia Agrees to Patent License Deal with Huawei
Nokia and China's Huawei have signed a multi-year patent license agreement, the Finnish company said on Thursday.
Nokia was one of the best-performing major stocks in Europe on Thursday morning after the Finnish telecoms equipment group said its revenues will be boosted by a new licensing agreement with Huawei.
The company announced a “multi-year patent license agreement” with the fast-growing Chinese device maker. Details of the agreement were confidential, but Nokia said it expects to begin seeing the financial benefits of the deal from as soon as its fourth-quarter results, “with additional revenues expected” over time.
"Huawei is one of China's largest companies and is among the world's leading smartphone manufacturers and we are delighted to welcome them to our family of patent licensees," said Maria Varsellona, the chief legal officer at Nokia.
While details of the license agreement remain confidential, Nokia will follow its existing practices for disclosing patent licensing revenue in its quarterly financial reports and expects that revenue for the agreement will begin to be recognized in the fourth quarter of 2017, including an element of non-recurring catch-up revenue, with additional revenues expected during the term of the agreement.
The agreement also reflects Chinese handset makers’ growing efforts to break into developed markets. Chinese brands have grown rapidly in recent years, but their strength has been focused in emerging markets, whereas stricter intellectual property laws have slowed their advance in Europe.
The news provided some welcome respite for Nokia investors after a difficult few months. The company has shifted its focus to network technology since the decline of its old handset business, but profits have fallen this year as its customers cut spending ahead of the expected arrival of new 5G networks at the end of the decade.
Nokia earned 474 million euros ($562 million) from sales of its patents and brand licensing in the third quarter of 2017, representing around 8.6% of total group sales.
Revenue from its licensing business has played an increasingly important role for Nokia, helping offset sales declines in the highly competitive networks business.
In its most recent quarterly report, Chief Executive Rajeev Suri said licensing is a focus for the company as it enjoys excellent momentum and has considerable opportunities to further develop in 2018 and beyond.
Nokia's shares rose on the news and were up 3.2 percent at 0819 GMT.
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