Samsung Seeks To End Patent Spat, Will Pay Ericsson $650M And Royalties

| Updated: Tuesday, January 28, 2014, 13:31 [IST]

South Korean tech giant Samsung took a major step toward settling an age old patent spat with its Swedish counterpart Ericsson after the company announced that it will pay the Swedish heavyweight $650m and royalties.

Ericsson, the world's primary mobile network equipment maker, sued Samsung back in late 2012 after the company claimed that the Korean firm had infringed its patents involving several technological advancements. These included touchscreen functionality, efficiency in network and improved voice transmission.

Samsung, however, later made a counter claim to disapprove all such claims from the Swedish firm.

As of now, thanks to the settlement between the companies, the initial payment from Samsung will lift fourth-quarter sales by 4.2 billion Swedish crowns, with the net income also increasing by 3.3 billion, Ericsson said in a statement.

While Ericsson declined to provide any further details about the agreement or the kind of royalties Samsung would eventually pay, the Swedish firm's shares increased 2.4 per cent as markets expected billions of crowns of extra revenue for the company for years to come.

Although Ericsson's Chief Intellectual Property Officer, Kasim Alfalahi, didn't mention how long the agreement with Samsung would last, but confirmed that patent agreements generally cover four to seven years.

"Ericsson's settlement with Samsung is going to be an important future driver of its earnings," JP Morgan analyst Rod Hall also stated.

"The ongoing revenue could be approx 2.1 billion Swedish crowns annually and, with these revenues having 70 percent ongoing margin, they could add 5.4 percent to 2014 EPS."

On a similar note, Bernstein analyst Pierre Ferragu also estimated annual revenues from the royalties at 1.7 billion crowns.