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At first glance it looks like Swedish telecom equipment maker Ericsson made out better in the seven-year deal with Apple Inc. (Nasdaq: AAPL), which ends a yearlong dispute.
Apple agreed to pay Ericsson to license its 2G, 3G, and 4G-LTE technology in its iPhones and iPads. The deal is global and settles issues with the earlier technologies, as well as setting terms for the use of the current 4G-LTE standard.
Ericsson said Apple will pay an initial amount followed by ongoing royalties. Further details were not disclosed.
Investment bank ABG Sundal Collier estimated that Ericsson will end up with about 0.5% of Apple's iPad and iPhone revenue.
I did the math to find out what that means for Ericsson. Based on that figure and fiscal year 2015 iPhone revenue of $155.1 billion and iPad revenue of $23.2 billion, the deal puts about $892 million into Ericsson's pocket annually.
If true, the deal would boost Ericsson's intellectual property 2014 revenue of $1.163 billion by about 75%. However, the company is projecting 2015 IP revenue of $1.52 billion to $1.64 billion, suggesting Ericsson isn't getting quite that much. But even half of Collier's estimate would add $446 million of IP revenue per year.
That's why Ericsson stock shot up as much as 7.23%, to $9.79, in early trading today.
Still, it begs the question: Why would the AAPL stock price go up in the wake of news of a patent settlement that has the company forking over millions of dollars a year?
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.