How serious is Google about buying InterDigital?

editor's corner
Thanks to bankrupt Nortel Networks putting its valuable patent portfolio up for auction, wireless patents have become a hot commodity, and InterDigital seems to have found an opportunity.

Earlier this month a  coalition of six companies, including Apple (NASDAQ:AAPL), Ericsson (NASDAQ:ERIC), Microsoft (NASDAQ:MSFT) and Research In Motion (NASDAQ:RIMM), won Nortel's patent portfolio for $4.5 billion in a bankruptcy auction, outbidding Google (NASDAQ:GOOG) and Intel. The winning consortium also included Sony and EMC Corp., the IT storage and cloud computing firm.

Now several report reports have pegged Google as being in talks with InterDigital about possibly purchasing the wireless technology and licensing firm, a day after InterDigital said it is exploring strategic options, including a possible sale.

In turn, the Wall Street Journal report said, part of InterDigital's decision to explore a sale was spurred by Google's interest. A Google spokesman declined to comment and an InterDigital spokesman declined to comment but said the company's technology and patents would be valuable to several potential buyers, according to the Journal.

InterDigital develops and licenses circuitry designs, software and wireless technologies. InterDigital's stock has a market value of $1.95 billion, and the firm holds about 8,800 patents and has about 10,000 patent applications in process around the world.

Google doesn't have much of a wireless patent portfolio. It needs patents to defend its Android licensees. Most recently, an administrative law judge's initial ruling for the U.S. International Trade Commission found HTC in violation of two of Apple's patents. If the six-member ITC panel agrees with the judge's decision it could impose an embargo preventing the U.S. importation of some HTC smartphones.

Interestingly, it was InterDigital that said not so long ago that it was interested in Nortel's patents. The company raised $200 million from a private offering last month, and it had been focusing on buying more LTE patents as it aims to charge incrementally more for them than its 2G and 3G patents. For instance, "a rate increase of just 0.1 percent would result in an additional $1.2 billion in revenue on a net present value basis, based on sales of 3G and LTE enabled handsets over 10 years," said Bill Merritt, president and CEO of InterDigital, during the company's first-quarter conference call, according to transcripts from Seeking Alpha.

"...We believe if we can purchase the right patent portfolio with meaningful size or the right company with such assets, it can quickly translate into higher rates and deliver substantial value to shareholders. We believe such assets are on the market and more will come," Merritt said. "One such asset, of course, is the Nortel patent portfolio."

Merritt had also said he believes the supply of LTE patents coming to market will increase. If the demand for patents increases, many companies could decide to sell them off. "We are seeing that now, as many companies are evaluating their patent assets and deciding whether they should sell them," Merritt said.

It seems that InterDigital has now become one of those companies. Google, however, didn't seem to be too serious about bidding on Nortel's assets. Will it be willing to pay handsomely for InterDigital's patents that it has amassed and developed for so long?--Lynnette