Nokia has settled its legal battle with Apple with a new patent license agreement and also signed a business deal with the U.S. Giant, surprising investors who had expected the dispute to drag on.
The companies said on Tuesday that Nokia (NOK) would receive an upfront cash payment and additional revenues from Apple (AAPL) starting from the current quarter, without giving details. Analysts said the revenue was likely to be far higher than a previous deal.
Nokia shares, which fell in December when the patent dispute was announced, jumped as much as 8% to their highest since February 2016 and were 6.5% higher at 5.88 euros by 8:48 a.m. GMT.
“We are pleased with this resolution of our dispute and we look forward to expanding our business relationship with Nokia,” Apple Chief Operating Officer Jeff Williams said in a joint statement from the companies.
A previous patent license contract between the companies expired last year, and both sides took legal action in December. Apple complained of being overcharged and Nokia responded by accusing Apple of violating technology patents.
In the absence of a new deal, Nokia cut its annual run-rate forecast in December for patent and brand licensing sales to 800 million euros ($900 million) from 950 million euros previously. In its latest quarterly report released in April, Nokia stopped giving an annual run-rate forecast altogether.
“(The agreement) moves our relationship with Apple from being adversaries in court to business partners,” Nokia’s Chief Legal Officer Maria Varsellona said in a statement.
New Business Deal
Analysts were surprised by the relatively quick resolution, as they had feared a protracted legal dispute.
“For Nokia, it’s good news they got this out of the way, but we still have to wait for details about the financial impact,” said OP Equities analyst Hannu Rauhala.
“The previous annual rate was 150 million euros, so I assume this to be more, around 500 million euros.”
Under the new business agreement, Nokia said it would provide network products and services to Apple while Apple would resume carrying Nokia’s digital health products in its retail and online stores. The firms will also look into further collaboration in digital health, Nokia said.
Rauhala said Apple might have been willing to settle with Nokia as the U.S. Company’s patent battle with chipmaker Qualcomm Inc has escalated.
Inderes analyst Mikael Rautanen said Nokia’s aim to expand its sales of network equipment sales beyond telecom operators to global internet and technology giants may also have played a part in the resolution of the dispute.
Patent royalties represent only a sliver of Nokia’s overall revenue, more than 90% of which comes from telecoms network equipment. But licensing payments are highly profitable and the network business is suffering an industry-wide slump.
Nokia’s patents cover technology that reduces the need for hardware components in a phone, conserves battery life, increases radio reception, helps in recovering lost phones and enables voice recognition, among other features.
Once the world’s dominant cellphone maker, Nokia sold its handset business to Microsoft (MSFT) in 2014 to focus on its network business and large portfolio of mobile device patents.
Nokia’s total sales in 2016 were about 24 billion euros.