As part of its resolution of a multi-year intellectual property dispute with Apple, Nokia will become a supplier of IP networking gear to the company. Although specifics about the deal are unclear, some analysts speculate that it includes cloud networking equipment that Nokia is expected to announce later this quarter.
During Nokia’s first quarter earnings call with investors in April, CEO Rajeev Suri said the company was planning a major IP product launch in June that would put the company in a strong competitive position with webscale and service provider customers. At the time, Suri said he expected orders for that product to occur in the fourth quarter and revenue to be realized in early 2018.
In a news release about the settlement, Nokia said it will provide certain network infrastructure products and services to Apple and will receive a cash payment from the company, which will be recognized in the second quarter.
Nokia added that the value of the agreement will be reflected partially as patent licensing net sales in Nokia Technologies and partially as net sales in other Nokia business groups. Nokia also said it will continue to disclose patent licensing revenue in its quarterly announcements and expects that revenues for the agreement will be recognized in the second quarter.
Investors reacted favorably to the settlement news. At mid-day Nokia’s stock was up 6 percent to $6.53 a share.
Expanding its Customer Base
The Apple deal fits well with Nokia’s bigger strategy, which is to expand beyond its core service provider customer base. Suri said at the first quarter investor call that the company was going to continue to focus on delivering high performance networks to service providers but also wanted to expand its sales to vertical markets like energy, transportation, and webscale firms, such as Apple, Google, and Amazon, that are building huge data centers.