Timing of Nokia agreement suggests a 'favorable outcome' for Apple

Analyst Maynard Um with UBS Investment Research believes Apple may have been in a favorable position in negotiations with Nokia because of a ruling in the iPhone maker's favor made by the U.S. International Trade Commission in March. That early victory may have allowed Apple to reach a better royalty agreement with Nokia than the Cupertino, Calif., company had expected.

In March, the ITC ruled that Apple did not infringe on five patents owned by Nokia. It was a preliminary ruling in a sprawling legal conflict between the two companies, with both accusing the other of multiple patent violations.

But in April, the ITC staff also voiced its support for Nokia, causing a setback for Apple. Officials at the commission recommended that Nokia not be found liable of infringing on Apple's patents.

That legal battle came to an end this week, as Nokia announced it has entered into an agreement with Apple and both companies have withdrawn their complaints from the ITC. Through the deal, Nokia will receive a one-time payment from Apple, as well as ongoing royalty payments.

Um said in a note to investors on Tuesday that both Nokia and Apple are likely to remain tight-lipped over the sums involved in their agreement, as is standard with industry cross-licensing. But he believes Apple's one-time payment to Nokia probably amounts to several hundred million dollars.

Based on the presumption that Apple was accruing liability funds related to its dispute with Nokia, Um said the outcome could be even more favorable for the iPhone maker. For example, Apple may have been "over-accruing" for a higher potential cost of a licensing deal with Nokia, and a settlement will also reduce legal expenses by avoiding a courtroom showdown that was expected to last for years.

UBS Investment Research sees a benefit to Apple of about 6 cents in earnings per share for each quarter as a result of the settlement. The firm has maintained its "buy" rating for AAPL stock, and reiterated a 12-month price target of $510.