Ever since the bidding for Nortel's patents went into the stratosphere, with the biggest names in the industry competing over the auction and fighting over the results, patents have become a kind of Antiques Roadshow of the high-tech industry: Those old things you've had lying around, gathering dust, could be worth millions (or even billions)!
If that's really the case, the biggest and most cluttered attic in the telecom world would have to belong to Alcatel-Lucent, primarily because of the second part of its name: Lucent, as in Bell Labs, which famously claimed "a patent a day" during its heyday as America's premiere high-tech research lab. And indeed, this article from Bloomberg makes just that case, in the context of speculation that goes beyond what we've been seeing about a proposed ALU Enterprise spinoff. The Bloomberg article talks in terms of a breakup of the entire Alcatel-Lucent company.
In the end, Nortel's patents sold for more than all of its business units combined: $4.5 billion for the patents, vs. just under $4 billion for all of the business units put together (as summarized on Wikipedia. Bloomberg estimates that ALU's situation may be comparable, gauging ALU's total value at $20 billion, of which they estimate about $9 billion to be the value of the company's 18,800 U.S. patents. One other noteworthy figure: ALU paid $15 billion to acquire Lucent in the first place, the article reminds us.
ALU Enterprise would be a sidelight in a patent-focused future of the parent company. Genesys's patents for call center technology would likely be included (unless the Enterprise group itself were broken up and sold in pieces). But by far it's the Bell Labs portfolio that would be the crown jewel.
In some ways, though, the lack of such a blockbuster patent portfolio could work to ALU Enterprise's advantage. Clearly, if Bell Labs' assets were to go on the block, the bidders would be the same cast of characters we saw in the Nortel instance--your Microsofts, your Googles, your Apples. The private equity firms that have wound up with enterprise business units, as in the case of Siemens Enterprise and the speculation regarding ALU (per the link above to Sheila's blog) won't be in the running for patent portfolios.
It does bring us back to the question, though, of what private equity companies like Silver Lake, Gores Group, and Permira, believe they will get out of acquiring an Avaya, a SEN or an ALU Enterprise. I'd argue that these companies are, right now, doing some of the most innovative thinking in the industry when it comes to creating a vision for the next generation of enterprise communications networks. Unfortunately, unless that innovative thinking translates into near-term profits, private equity may look to cut its losses, leaving these companies' futures even more uncertain.
Avaya bought Nortel Enterprise for its customer base, a gambit that was probably necessary but whose success was limited by that base's exodus during the bankruptcy process, before Avaya could even take over. Siemens Enterprise lost market share during the two years it was up for sale. Hopefully ALU Enterprise will have a shorter period of uncertainty to deal with, so that the base can be assured about future directions.
During the Nortel bankruptcy, we often talked about Nortel's customer base as its chief asset. Turned out, it wasn't the customers nor even the existing products; it was the patents. You own the patents. It turns out that no matter what anyone says, you don't own the customer.
