Last last week we brought you news of Nokia’s first-quarter earnings report. Despite additions to its Lumia line of smartphones, the company reported a $1.7 billion loss for the quarter.
Interestingly, although the iPhone is almost certainly one of the major culprits behind Nokia’s flagging sales, the iPhone also kept Nokia’s first quarter losses from being even greater. How is that, you ask? Last summer Nokia and Apple settled a lengthy patent war (much like the one currently raging between Apple and Samsung). As part of the agreement, Apple paid Nokia a one-time sum of about $600 million, and licensed the infringed patents from Nokia to the tune of €8 in royalties per iPhone sold. At current exchange rates, that works out to about $10.60 that Nokia made from the sale of every iPhone.
Now, while Nokia only sold 11.9 million smartphones in the first quarter, Apple sold a whopping 35.1 million smartphones, making Apple either the largest or second largest smartphone maker in the world, depending on who you ask. After a little quick math, it turns out that Nokia made $372 million from the sales of Apple’s iPhone between January 2012 and March 2012 (Nokia’s 1st quarter, Apple’s 2nd). Conversely, Nokia’s mobile phone division saw quarterly loss of €219 million ($290 million). In a nutshell, Nokia made $82 million more on iPhones than it lost on its own mobile phones.
The moral of the story, then, is that while patent lawsuits like the ones currently going between Apple and Samsung, Motorola and Microsoft, Motorola and Apple, etc. may look (and may be) ridiculous, they can make a huge difference to a company’s bottom line. In effect. The licensing agreement agreement between Nokia and Apple resulted in Nokia getting over a third of a billion dollars in free money last quarter. While that wasn’t enough to keep Nokia in the black, it did mean the difference between $1.7 billion in losses and over $2 billion in losses, and that’s nothing to sneeze at.