Ericsson just released its report for the fourth quarter and the full year of 2021 (PDF). It's the first written communication to investors on Ericsson's financials since the outbreak of renewed patent litigation with Apple (BTW, a German Apple v. Ericsson countersuit was discovered yesterday), so I wanted to take a look at the numbers.
First, Ericsson's overall financial situation appears more than strong enough to duke it out with Apple if need be:
"Free cash flow before M&A was [USD 3.5 (2.4) billion] for full-year 2021, the highest in Ericsson’s history, further strengthening the net cash position to [USD 7.1 (4.5) billion]." (emphasis omitted; Swedish krona figures converted to U.S. dollars based on current exchange rate; figures in parentheses relate to previous period)
That picture looked rather different when Ericsson was forced to settle with Apple in 2015.
It does seem that Apple isn't really paying Ericsson a huge amount of royalties, as the combined impact of the dispute with Apple and some other (unnamed) non-renewals is limited:
"Ericsson’s IPR licensing revenues continue to be affected by several expiring patent license agreements pending renewal and 5G license negotiations. This will lead to estimated revenues from IPR licensing of [USD $110-150 million] in Q1, unless renewals are signed in the first quarter. The actual financial impact will depend on the timing as well as terms and conditions of new agreements." (Swedish krona figures converted to U.S. dollars based on current exchange rate)
How does that projection compare to how the previous quarter and the same (first) quarter panned out a year earlier?
"IPR revenues [in the quarter that just ended] amounted to [USD 260-280 million], including a new smaller agreement with retroactive impact." (Swedish krona figures converted to U.S. dollars based on current exchange rate)
So the Q1 estimate (unless there's a quick settlement) is about $120-150 million lower than the actual Q4 figures (while Apple was still paying its license fees). But Q4 is the strongest one for smartphones, so let's also check on the situation of a year ago (PDF):
"IPR licensing revenues amounted to [USD $85 million ($270 million)] in the quarter. The decline is mainly related to expired contracts pending renewal and lower volumes with one licensee. For the largest contract under renewal, both legal and negotiation processes are continuing." (emphasis omitted; Swedish krona figures converted to U.S. dollars based on current exchange rate; figures in parentheses relate to previous period)
The main reason was the dispute with Samsung (which ended shortly thereafter), and the "lower volumes with one licensee" relate to Huawei as everyone in the industry knows. Generally speaking, Ericsson managed to replace the lost revenue opportunity with Huawei by concluding various other agreements.
So, all in all, it looks like the non-renewal (for now) with Apple and some other parties--whose names are not known--costs about $100-150 million per quarter.
I've seen estimates by others according to which Apple only paid about $200 million per year (or about $50 million per quarter) to Ericsson under the previous agreement. I believe it's more, as Apple presumably accounts for well over half of the negative revenue impact from non-renewals Ericsson is talking about. But it's not a whole lot more, and the next agreement will likely be a lot bigger in light of 5G, favorable case law, and Ericsson's stronger financial situation. It's just hard to tell how long it will take Ericsson to get there. A "lucky punch" with a preliminary injunction in Brazil and/or the Netherlands could resolve the dispute pretty soon, but it could also take years.
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