Is the market undervaluing Palm’s massive patent holdings? | webOS Nation
 
 

Is the market undervaluing Palm’s massive patent holdings? 97

by Derek Kessler Sun, 28 Mar 2010 2:05 pm EDT

Patent 7555727

There are two things that Palm owns that are of true value: webOS and a giant bucket full of patents. Either would be good reason for a larger competitor to purchase Palm, and according to some analysts, either is good reason to declare Palm to be undervalued (Palm stock plus Elevation Partner’s 1/3 share equals approximately one billion dollars).

That Montana-sized basket full of patents is good for several things. Especially when that basket of patents contain things like "Integrated Handheld Computing and Telephony System and Services," i.e. smartphone. For one, Palm can claim royalties when other companies use that patent. It also, at least to this point, has served as a barrier against most serious patent infringement cases (Hello, Cupertino). Having a lot of patents is also good for something else: when those patents are licensed by many companies, it gives the holder significant value. Palm's veritable trove of patents has lead PatentVest CEO Anthony Mazzarella to declare to Investors Business Daily that, “Based on our metrics, the value of Palm’s intellectual property is along the same order of magnitude as Apple. The market is overlooking the IP value in Palm, which has great value.”

It’s worth noting that Palm’s patents are almost exclusively in the realm of PDA and smartphone technology and user interfaces, while Apple’s span a wide range of products, including personal entertainment devices, home computers, servers, digital services, and smartphones. While we can’t say for certain, we think it’s safe to say that Palm may very well have the most impressive patent portfolio in the entire smartphone industry.

Patent 7555727 PatentVest’s metrics include the raw number of patent applications filed by a particular company, and the number of times those patents are cited by other companies’ patents, among other measures. A company must cite a patent that is similar to or the base for their own work. Put simply, the more times a patent is cited, the more that patent is worth, and the more one company cites another’s work, the more the latter is worth to the former.

So that begs the question, to whom would Palm be worth the most? According to Mazzarella, Samsung and Nokia. Samsung’s patent pool, impressive in its own right, cites Palm’s patents more than any other company, followed by Nokia. Microsoft is in third, with about half as many Palm citations as Samsung. Seeing as both companies are busy with their own product strategies and operating systems (Bada for Samsung and both Symbian and Maemo/Meego for Nokia), any value they may place on Palm would most likely be on the patent front.

But Will Stofega, program manager for mobile research with IDC, doesn’t see a purchase of Palm by Samsung or Nokia as a leading possibility. The only reason to buy a company exclusively for their patents is if those are the only items of value that company holds. Palm is more than just a stack of patents: they have well-established carrier and manufacturer relationships, a high-quality if under-appreciated mobile operating system, and a good bit of survival cash on hand.

Stofega believes that both Nokia and Samsung are likely to concentrate on making their own strategies succeed. Trying to mix Palm’s products in with the two smartphone operating systems each supported by the companies (Samsung also produces Android handsets, along with several non-smartphone mobile devices) would be too expensive and too distracting of a venture.

He thinks that maybe the market has turned on Palm too quickly (and we may agree with him), "Palm has some time left. Not a great deal of time to change course, but they have time. I think everyone is throwing in the towel a little too quickly. They still have a path. Some may not hold them in good standing, but I think there's a lot more to it right now."

[via: EnterpriseMobileToday.com]

97 Comments

still hoping webOS makes Palm flourish in the near future..go Palm!!

wwddd (what would donna dubinsky do)

Daaaaaamn straight. Great article that shows the truth...that Palm is under-appreciated on various fronts! They'll turn the tables around, soon. Just before everyone closes the casket Palm will definitely rock the entire mobile scene w/ something amazing. Doubt me? Ok...we'll see ;)

GoPalm Go

Wasn't Apple on the verge of extinction 20+/- years ago? Palk can do it but can't afford many mistakes.

er, Palm, not Palk...

Unlike Engadget, there's an edit button for commments... or

I don't know if it was that bad for Apple or not. In December 1997, their market cap hit rock bottom with $3 billion. We know that Palm is much lower right now (less than $1 billion). And Apple was profitable again soon, they just didn't have the confidence of the public. Palm needs both profits and public confidence right now.

apple was a computer company 20 years ago though not even dabbling in Cell phones. And palm's resurgence about 10 years or so ago came largely on the back of a massive surge in revenue from the Ipod.

Huh???

Except 20 years ago, Microsoft had to bail out Apple. Who would bail out Palm right now?

go palm!

I'm a believer (easy to say when not an investor and just a Palm aficionado)...

This makes one think is Palm susceptible to a hostile take over? Their stock is dramatically undervalued compared to their true value.

Hostile takeovers still require FTC approval. And upon such efforts, Palm could file patent infringement charges which should tie it up for quite a while.

hostile take-overs also raise stock prices, so whoever buys Palm will pay a lot more than today's value. Of course, that would change completely if Palm runs out of cash.

I'm waiting for some cash then I'm going to buy as much Palm stock as I can. They've got the next 3 years planned in detail, and that's evident b/c webOS was planned 3 years b4 it came out.

maybe palm should start sueing everyone

No, that would be just wrong and rude.

This is the real world kid, not your 3rd grade English class.

Yeah and then they will be one of those companies that just sit on patents and collect money. I don't want Palm to be evil. I don't know what you mean about 3rd grade english class, twas a dark cutthroat hell hole.

I just want palm to survive, and rhey need money. But I guess they are doing major cross lisensing, but idk if that's helping them right now

litigation is expensive and the attorneys end of making most of the money. The better bet is licensing the patents for limited renewable terms. It would be a little bit like blackmail, but Palm could offer the licenses at a very low price with an agreement to provide safe harbor against lawsuits on future products. If they pick the right patents, they could really put a squeeze on some of Apple's current patent wranglings.

Don't let palm fall to microsoft!!!!!!!!

where is flash for palm pre ????????

It's coming (eventually) and not even close to on-topic discussion for this article.

If you're having trouble getting Flash to work on your Pre, please pick the right thread.

Even a giant can be taken down. Palm was on top once and that was not overnight. When this whole WebOS world catches on, it may be just a matter of time before Palm is #1 again. Palm can say "been there - done that". Now they just need to say "we want to do it again". On a VERY positive note, All the attention be it good or bad, is just that, attention. The more attention Palm gets, the more the name becomes a common known word to todays generation.

Palm was on top when nobody else was playing. As soon as Blackberry launched, it was a downhill slide to lower level parking lot. They've not been blessed with great marketing since the takeover of Handspring (lets not forget, Treo wasn't a Palm product or concept.

It was hardly an immediate slide. People tend to forget how long RIM has been around because it's only in the last few years that they've been promoted and available to the general not corporate public. Their inititial products for many years were e-mail only with very limited PIM functionality and were only available for use with their corporate server software packages. While generally liked by their users there were relatively few.

You are however correct that much of their _eventual_ growth was at the expense of Palm and it's lack of innovation with the Treo line from about about '03-'04 on. Just want to be fair and point out that most early blackberry users had to carry a blackberry plus at least a phone if not BB + phone + PDA (or very commonly BB + treo (for phone and personal e-mail).

Ummm... actually your statement isn't entirely true...

Handspring was a maker of Palm OS-based Visor- and Treo-branded personal digital assistants. It was run by Jeff Hawkins, Donna Dubinsky, and Ed Colligan, the original inventors of the Palm Pilot and founders of Palm Computing, after they became unhappy with the direction in which 3Com was taking the Palm division. Handspring was founded in June 1998 and merged with Palm, Inc.'s hardware division in 2003 to form palmOne.

What part isn't true?

That Palm lead the industry until competition showed up and Palm failed to grow with the market?

That Treo/smartphone was a Handspring concept that Palm acquired?

Or that Palm struggles to market good products?

awww...the graphic made me miss my treo 300...still my favorite keyboard on a smartphone

Wasn't my fav, I had the Treo 180 and not having the backlight killed me. But the Green Backlight was always a nice throwback.

somebody by that analyst a beer ... Or send him a truckload.... Good stuff

Read it again.


"PatentVest CEO Anthony Mazzarella to declare to Investors Business Daily that,

i hope that plan start making some head way. (CANT WAIT TIL JUNE) u kno if it even comes out

After using the new 800 mhz script/patch, I'm actually excited about Palm again. Seeing WebOS operating with speed is pretty awesome. All Palm needs is a screaming fast device with a larger screen and they'll be money. They've got the rest covered already.

I believe that by reporting Palm's financial struggles over the past weeks in that detail, the precentral crew (and users by responding to that) did a disservice to Palm in unsettling new customers.
Although the situation may be worth to know about, it sure won't help if you're constantly feeding the discussion. What do you think most news and media services are taking their information and opinions from regarding tech gadgets?

I think you give the average consumer WAY TOO MUCH CREDIT for researching a product they're about to commit $1000 to $2000 dollars per year towards.

When was the last time you heard someone say "Did you see that story in precentral today?" And the bad press is the aftermath of poor strategy and implementation. Should we ignore it and allow ourselves to make ill-advised decisions?

But, your point is not without merrit. I was reading a similar sentiment today in pravda.com and they said....

You know, I had some harsh words for Palm last week. Many of us did. But, sometimes, and at least in my case, I sincerely said what I said because I want Palm to SUCCEED!!! And sometimes, we may even have legitimate criticism, and it's not like I can just send Jon Rubenstien an email and tell him how to run his business. A forum like this presents an avenue for us, the concerned and sometimes invested user, to put our constructive criticism out there to be seen.

Part of my suggestions last week had to do with Palm licensing their patents...Looks like someone else had the same idea. =)

A. Men. Brother.

Excuse my language. Cough, cough HTC EVO 4G. Cough cough.

HTC of the week. Dont let us stop you. Lets hope if does better than the Instinct and other HTC builds. Or better than most of the other plastic toys-of-the week running Android to little fanfare at androidcentral.com.

If you need 4G validation via some sort of envy from us you probably wont find it. Try Viagara.

The HTC is by far the most powerful phone coming out as of today. This is far from another 'toy'. By the way, it does not use plastic like Palm does.

Every phone is "the most powerful", then it releases and we see what weakness bind it up and keep it from being a market player. The company is great, but their products as individuals still lack impact and significance.

All the moops that were in here nine months ago calling the Hero a game changer. Nice phone, but not a great market impact. If Pogue doens't profile it, does it really exist?

You should re-read my post. I said the HTC EVO is the most powerful anounced as of TODAY. Yes in the future there will be more powerful phones, but the EVO is the most powerful as of today. Please read posts before you go off in your replies.

You should re-read the post you're replying to, PreDogs makes a valid point: it's easy (and fun!) to look at the specs for an unreleased phone and say, "oooh!" - but until it's in your hands, you don't really know if those specs have been put to good use, and how they compare to other phones on the market at the time.

There's a long, long tradition of companies releasing vaporware specs to keep folks interested while they scramble to finish development. See also: the Palm Pre...

Not sayin' the EVO won't be a great phone, but right now it's too soon to call it.

From the pictures I've seen, it looks like the EVO does indeed use a great amount of plastic.

Have fun without a keyboard and sporadic "4g" coverage. As soon as you get it, Palm will have something better.

Have you seen the specs on the HTC EVO? Palm would have to invest millions to come up with hardware the HTC EVO has. Unless they bring in a partner I dont see how they can create a device like the EVO.

Millions? Is that a lot in the high tech world? WTF? In a year, Evo will be yesterday's news, and it's O/S will still have the hitches that all Androids share.

Go ahead, be the first to own the Evo. Find the flaws so three months later, the rest of us can get the phone that did it right.

Obviously the EVO will be old tech in a year. What is your point? Are you being Mr. Obvious today? How much do you think it takes to design and market a new phone, all knowing one?

My point was clear. You make "millions" sound like a labor or option. They are not buying groceries with food stamps. Yes, they will spend millions. Their next device will be capable of 4G, it will have a 1gh processor or more, will have 512mb RAM or more, 32gig flash or more, will have a deep battery and will be more than ready to run WebOS quickly and cleanly like we're asking the Pre to do. Anything less, and its pretty much going to sit on the shelf until the casket is sealed.

If you want to compare a phone that has been on the market for ten months to a phone that does not exist yet, the Evo is gonna win on specs. But in six months, it could easily be an Android Albatross around your neck. If I thought Android was hot stuff, I'd be there already. I have the resources, I have the interest to run the best phone I can find. So troll if you like, we all seem to agree the Evo specs out nicely. But hot specs just triple the anger when the phone comes up short.

If the phone is so hot, go over the androidcentral and rub each other silly. This is a Pre site, and a patent thread, and you're just a troll with low self esteem trying to look "smart" or something comparing a developing phone with a current box of high tech vacuum.

Excuse my language. Cough, cough HTC EVO 4G. Cough cough.

I think Palm is poising itself for a buyout. The stock has already sank from $18 (oct), to under $4. Jon has already stated that next quarter will be horrible which means that the stock will probably go sub-$3.

Underestimated stock != profit or success.

The cash burn for the next quarter is going to be ridiculous. When you're trying to research/develop new technology/phone, advertise, and release a GSM model of a lackluster-selling phone, you need all the cash you can get. Unfortunately for Palm, $500m is not going to last them unless something changes.

Loved this article! Well written and timely. This article is for all of those doom n gloom posters.

Was it supposed to be "It's worth noting" instead of "It's worth nothing"? That makes a difference.

I don't understand why the salesreps in the carriers that sell webos can't just recommend it to their customers. These are easy to use phones compared to android, iphone and blackberry. Also not as screen cluttered and confusing as the hd2 and more fun than a feature phone. If these sales rep would give just a little more effort to sell webos and palm make better advertisement, they would have a strong position in the smartphone game.

Palm, if you're listening . . .
-"overclock" your Pres to 800 MHz what they are supposed to be
-put the 1350 batteries in.
-your troubles will be OVER.

I don't think it would be a good idea for Palm to be running the CPU at 200 MHz above the manufacturer's recommended speed. Their troubles will start up again when a bunch of people with fried processors that came from lower-binned batches get a class action lawsuit going.

General Motors, if you're listening, pack all your cars with NOS and mount racing slicks and take the heavy impact beams out of the doors...

Then please sell one to jfphysics

well now that you mention the EVO 4G, I'm also hoping a new Palm device with WiMAX radio and better specs that compete or surpass the EVO 4G comes out soon, whether it's that so-called C40 or something else, but we could really use a new flagship device Palm!

To be honest, I don't even think Palm will be able to compete unless they come out with a 4G phone. I'm a Palm fan, but that Evo is pretty much the God-send of what alot of ppl have been looking for. Another thing to consider, is that Verizon's 4G will also be rolling out this year. You can almost guarantee that the Evo will end up there as well. I will not buy another Palm phone, unless it's 4G. I'm sure I'm not the only one that feels like that.

I was told when I got my pre that it was able to use 4g when ever in a 4g coverage area. Was this not true?

Not true. The Pre only goes up to 3G.

For what it's worth, I've heard idiot/liar salespeople say that the Treo Pro could go 4G with a software upgrade.

Patents or not, if Palm doesn't come out with a compelling device in the Summer, they'll get bought out for dirt cheap. Part of me hopes Google will buy them, if anything, to keep the stupid patent wars off.

The problem is technology attention span is too short. And Palm isn't moving fast enough. Not to mention my phone after 9 months is starting to not feel so hot. I have cracks developing and a wobbling slider. All that topped off by a seemingly buggy 1.4 release.

well now that you mention the EVO 4G, I'm also hoping a new Palm device with WiMAX radio and better specs that compete or surpass the EVO 4G comes out soon, whether it's that so-called C40 or something else, but we could really use a new flagship device Palm!

Palm smalm. I done bein lied to bout updates n other non sense Jason n his friends are feedin you Palm dummies. I believe the HTC is a real phone with real obligations not sum put you in a fantasy world n get you to believe every thing we tell you Techno Crap.

in english please? palm will stick around. they'll come out with an astonishing device and will be the hot topic for a while until companies start imitating them and their ui becomes the norm.. then we'll all be craving something more revolutionary. but gestures will be palms winning feature over all the other imitating devices.

well now that you mention the EVO 4G, I'm also hoping a new Palm device with WiMAX radio and better specs that compete or surpass the EVO 4G comes out soon, whether it's that so-called C40 or something else, but we could really use a new flagship device Palm!

Like Palm is Doin. Evry other article is bout sumthin else bout that flash we was suppose to receive. You think I care bout sum equipment n other things palms not sellin. Giv me a reason to keep my Palm Pre.

Stop trolling; this is a site about Palm news, not about your selfish demands. Sit tight and calm down, for God's sake.

Like Palm is Doin. Evry other article is bout sumthin else bout that flash we was suppose to receive. You think I care bout sum equipment n other things palms not sellin. Giv me a reason to keep my Palm Pre.

Derek, dammit, you're an English degree guy, right? You should know there's a difference between "begs the question" and "raises the question"!

Stop contributing to the death of the English language! (Have you noticed that fewer and fewer people know the difference between "bring" and "take," as another example?)

Actually, Dieter's the English degree guy. I'm just a lowly student of Architecture.

I had 3 charger cables I'm now on my 4th one due to unexplained overheating in my wires. Still no flash since thee anouncement. Still no indications of wat ever theC40 is to at least enlighten Palm user of wat their nex phone is like. Cmon call me wat you want a troll watever but Palm keep releasin these Fisher Price apps like their ne good.

So, communicating in English is not your biggest problem?

(Eye see spoutin angro nos bigust problum)

Sorry Palm I dnt wanna hav to brake my phone to mak it seen like a really nice phone. For example the permitted release of the 800 MHz update. 1 month later phone is dead due to desprite attempts on makin updates to push the limits of my phone. Bring me C40 or bring me HTC EVO.

Well... I very much hope this information is circulated outside(!!) of PreCentral, too...

'In here', we all have put our money (either by buying their phones, and/or buy buying Palm stocks) on Palm already. You are preaching to the choir, buddy...

I am convinced all this negativity about Palm and its "under-performance" is fabricated and just part of a bigger scheme - namely to bring Palm down as much as possible, so a takeover is less costly for a competitor.

I just hate these times we're living in.. except its great technology, of course :)

your jus another poor soul pulled in by the fabrications of lies. I'm not bashin palm I'm jus one of many tellin them to get it together better yet to late HTC is on it way. Your jus settlin for ur palm cuz 4Gs not in ur area. N you kno intuitivly that the HTC is a hot phone. Matter of fact it wat you want in a phone huh! Dnt lie to urself buddy Palm is goin to SH.

hahahaha.

hahhahahah.

you're dennis miller, aren't you?

I don't think anyone who buys a Palm Pre is settling in any way. WebOS is far better a mobile OS than Android or iPhoneOS.

The HTC Evo is a hot phone because of it's specs. No doubt, it'll gain quite a bit of attention. But the hardware aside, I believe if it (the Evo) were running WebOS instead of Android, it would be an even better device.

Amen.

Patents in themselves without quality product aren't what make investors money, so they're irrelevant from the perspective of shareholder value. As a potential candidate for merger or purchase, well that's a different story altogether.

Nice try though, I've got to hand it to ya :) If you bought and held $PALM anywhere above 50% of it's 52 week high you're screwed for quite awhile. Sorry.

Personally, I think the HTC EVO release will be a defining moment for Palm. They've got a lot of things going for them, like their portfolio of patents and WebOS, but people don't buy patents - they buy merchandise. Right now, anything Apple will sell. Apple can literally create a simple flip phone and it'll sell. We all know that Apple's iphone OS is nowhere near what WebOS accomplishes.

If Palm can build up enough excitement around a new product (with a vitrual keyboard) in the next few months prior to the HTC launch, I think they have a shot. The marketing must be strong.

Unfortunately, Palm's sitting on a TON of inventory so I don't see them coming out with a new device anytime soon. I just wish they had teamed up with HTC sooner.

yea if I was Palm I would b constipated also seein that sum good SH!/ is comin out.

has anyone looked at the new model number (C40) yet like I see it? Isn't the provider for WiMax service to Sprint "Clear"? Also, 4G has been the call name for the Generation 4.0 network speeds and infrastructure. (I emphasize '.0' since, if anyone else remembers, Nextel rolled out 2.5G as a half step toward 3G.) Any coincidence that those two look somewhat familiar? "Clear 4.0" = "C40"

Then again, I could be WAY off. :O

Patents may or may be not included in a precise company's value calculation.

Because they fall into the category of intellectual capital they are e.g. Included in any IFRS statement, not so much however is this the case for US Gaap.

But after all there's no precise way to value patents.

The value of Palm, in theory, includes all a calculation of it's assets which would include all it's patents. No honestly few analysts are likely to have any grasp on the true value of a patent. so in that respect the author is probably right when he says "The market is overlooking the IP value in Palm, which has great value.

Blackmagic - Jon was talking about revenues, which is different than sell-through. Your post has some nice name-brand analogies, but it misses the point of why PALM dove 30% further after releasing bad numbers it had pre-announced.

Palm forced through shipments at the end of the quarter to increase their revenues (bc of the way GAAP accounting works) so they wouldn't look quite as bad as they actually were. Even if more product is sold to end users this next quarter, the revenue for next quarter was essentially borrowed for this quarter. So Jon isn't saying they'll sell less phones next quarter, he's simply acknowledging the likely effects of their accounting tricks.

The market doesn't like being lied to.. so when you make 340 Mil (or w/e) in revenue, but without shipping more units to carriers you would only make 140 Mil, the market feels like it was duped. This is what happened here. But imagine the alternative - don't ship and miss the analysts #s by 75% ouch.

money managers get what's going on, even if plenty of bloggers and talking heads don't.

i don't recall specifically mentioning sell through as the reason palm dove 30% after it preannounced and didn't intend to imply that it was. Not that it wouldn't be one of many considerations an investor makes. In fact my discussion of the stock fall was intended to be the general fall from say around $13 to it's current level of under $4 over the last few month or so. Regardless palm dove 30% right after it's earnings call because Palm failed to meet expectations even after they lowered their revenue forecast, and cut revenue by half for the following quarter. It's also got higher cash burn then the prior quarter, they got revenue in Q3 cause shipments were moved from Q4,investors don't believe training verizon people will make sales pick up. As for sell through well i don't see how any investor is going to be happy with having more then half of the shipped product go unsold sitting on shelves. so i'm sure that didn't help.

I was a palm investor a pre owner and sold around 13 or so after their last earnings call based largely on declining sell through but also on a general belief that I didn't see any buzz for the Pre on Verizon. regardless my point was largely that it may be true that analysts aren't paying attention to the patents but that doesn't mean they've completely undervalued the stock. They are using other well established ideas to value the stock.

Misguide or Not... I stand behind Palm and have put my faith/money where my mouth is.

Last week I bought Palm shares as I feel the stock is undervalued.

Here's to Palm's future and WebOS's further development.
At 4 bucks a share... it leave ample opportunity to grow... either from the "Official" release of the C40, which we hope will be a 4G WebOS phone... to the potentially unfortunate take-over bid... The way I see it Palm still has a good year left before them at the current rate, which to me is enough time to turn the tide.

well you'll be happy to know that Palm was upgraded by a few analysts. BMO Capital upgraded shares of Palm Underperform to Market Perform, holding its price target at $4.

doesn't prove much but at least that's some piece of mind. And hey if it goes up even 50 cents from this level it's a nice profit.

Well, going by what I see in that patent diagram, they've got to be getting something from LG for cribbing the Lotus from that design.

It's the other way around. Treo flip phones came and went long before LG's clamshell text phone. The logo in the diagram date this back to Handspring days, before Palm bought into integrated keyboards.

I don't get something. If other companies are referencing Palm's patents, then why aren't they paying Palm royalties? If Palm is so strapped for cash, why don't they selectively start cashing in on some of those patents. Sure Apple could patent attack them back but what about Samsung and Nokia? I can't imagine that Palm has infringed many of their patents. So go after them and just leave Apple be.