Google’s Bid for Nortel’s Brains

Earlier this month, former Ottawa telecom giant Nortel entered into a "stalking horse" agreement with Google for the sale of all of Nortel’s remaining patents and patent applications, for the negotiated price of $900 million. Some, however, believe that the patents are worth much more, perhaps as much as $15 billion. There’s about 6,000 patents, relating to everything from advanced Internet search and social networking to 4G wireless technologies and semiconductors.

The bid sets a ballpark figure for a bidding process in June in which global technology giants will battle it out for the last meaningful assets in Nortel’s war chest. What it’s telling me is that Google is intending to push more aggressively into the network and mobile space, which is dominated by a variety of huge builders of handsets and networks such as Nokia Corp., Apple and Ericsson just to name a few.

Google is undergoing an intense period of transition, as indicated in their recent financial results with expenses exceeding street estimates. And with so many infringements with their existing portfolio, building a bank of patents for future services can be seen as a clever flank strategy. Kent Walker, Google’s general counsel said “one of a company’s best defences against this kind of litigation is ironically to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services. If successful, we hope this portfolio will not only create a disincentive for others to sue Google, but also help us, our partners and the open source community continue to innovate.”

The Nortel patents could help Google branch out from its core Internet search business into areas including cloud computing and mobile advertising technologies. If they win the bid (which is not guaranteed) these patents will certainly help in projects like Android and Chrome and for them to continue to innovate. Walker adds "in the absence of meaningful reform, we believe it's the best long-term solution for Google, our users and our partners."

Newly installed CEO and co-founder Larry Page has been quite vocal in his strategy of enhancing existing products and inventing new ones and this latest bid is a clear execution of his plans. He wants to hire an additional 6,000 employees to his more than 26,000 employees already on board, so he has some really big plans. This is going to be an interesting bid with his rivals- meaning basically everyone as Google is into so many different things. It’s a fascinating time for technology and all the big players have their fortunes on the line. The Nortel war chest has some deep, extensive patents on how everything can work. I’m betting this auction will end up on the real high side.