Apple has settled a patent dispute with Finnish telecom equipment maker Nokia and agreed to buy more of its network products and services, sending Nokia shares up 7 percent.
The deal means Nokia will get bigger royalties from Apple for using its mobile phone patents, helping offset the impact of waning demand for its mobile network hardware.
Such legal battles are common in the industry but can drag on for years and analysts had not been expecting such a quick resolution to the dispute that started in December.
Under the deal announced in a joint statement from the companies on Tuesday, Nokia will also supply network infrastructure products to Apple, and Apple will resume sales of Nokia's digital health products in retail and online stores and look at further collaboration in health.
Digital health is one of the areas Nokia is targeting as it tries to develop new businesses to offset the industry-wide slump in demand for network equipment. Last year, Nokia bought France's Withings S.A., a small firm with products such as activity trackers and baby monitors built on digital platforms.
"There could emerge big future value from this as Apple could become an important distribution channel," said Handelsbanken analyst Daniel Djurberg, who has an "accumulate" recommendation for Nokia shares.
"I have not given any value so far for Nokia's digital health business, but might apply an option value to it."
INDUSTRIAL DEAL
Nokia Chief Executive Rajeev Suri told the company's annual general meeting later on Tuesday that the deal would help expand network sales beyond telecom operators to global internet and technology giants.
(The deal) involves a business collaboration ... in particular in areas of IP and optical equipment, which is quite key to webscale players when they build their data centers," he said. "It's a good deal, a multi-year licensing deal, and I love it that it has an industrial deal and aspect to it."
Under the patent license agreement, Nokia will receive a "significant" upfront cash payment and additional revenues from Apple starting from the current quarter. The companies did not give further details but analysts said the revenue was likely to be far higher than a previous deal.
Inge Heydorn, fund manager at Sentat Asset Management, said it was a smart move to collaborate on digital health products.
"It's interesting for Nokia in a five- to 10-year perspective since I think it will be hard to be profitable within mobile infrastructure," said Heydorn, whose firm does not hold any shares in Nokia.
Nokia shares, which fell in December when the patent dispute was announced, jumped to their highest since February 2016 and were up 6.7 percent at 5.89 euros by 1509 GMT (11:09 a.m. ET).
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.
Originally published on Reuters
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