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Thursday, July 21, 2011, 09:00 am PT (12:00 pm ET)

Apple paid $2.6B lion's share of $4.5B Nortel patent acquisition

Apple supplied more than half of the $4.5 billion paid by a consortium of companies to acquire Nortel's patent portfolio, new regulatory filings show.

Apple revealed in its 10-Q filing this week that it paid about $2.6 billion in the Nortel patent sale, analyst Maynard Um with UBS highlighted in a note to investors on Thursday. That's a sum greater than the $2 billion Apple was rumored to have paid shortly after the deal was announced.

Other members of the consortium included Microsoft, Research in Motion, Sony Ericsson, and EMC. In late June, the companies won a bidding war to obtain more than 6,000 patents from Nortel, which filed for bankruptcy in January of 2009.

Previous claims from Reuters suggested that RIM paid $770 million for its share of the patent portfolio, while EMC allegedly contributed $340 million.

The consortium beat out Google, which had established the minimum bid for the auction with a starting offer of $900 million. A number of bidders were interested in the patent trove because of key inventions related to the high-speed long-term evolution 4G wireless standard.

Apple's 10-Q made no mention of the licensing agreement it entered into with rival Nokia in June. That deal includes ongoing royalties in addition to a one-time lump sum payment, both of which remain secret. But evidence in Nokia's quarterly earnings issued on Thursday suggests that Apple's share was no more than $600 million.

Nortel


Beyond the Nortel patents and Nokia agreement, Um also noted that the 10-Q reveals Apple's warranty accruals were higher than claims for the fourth straight quarter. For the past year, Apple has "overaccrued" claims by about $600 million.

"While we recognize that accruals are for estimated future claims and that claims increased sequentially, we believe the company still has a healthy level of accruals unless claims were to increase significantly," he wrote.

If Apple were to reduce its reserves in the same magnitude it has with $600 million in claims over the past year, Um estimates the company would see a gross margin benefit of 200 basis points.