RealNetworks to Sell Patents to Intel
Source: SHARA TIBKEN
Intel Corp. agreed to pay $120 million to RealNetworks Inc. for video software and a large number of patents, in a deal that builds the chip maker's portfolio for streaming media on smartphones, laptops and other devices.
Intel will receive about 190 patents and 170 patent applications, as well as next-generation software that allows the quick compression or decompression of video for streaming. RealNetworks, meanwhile, will be able to use the patents in current and future products and will be working with Intel on continued development of the software and related products.
"To bring new technology like that [video software] to market requires significant reach into the consumer and business markets," RealNetworks Chief Executive Thomas Nielsen said in an interview. "A partner like Intel has the capacity and size to do that."
The deal―which sent RealNetworks shares soaring 29% to $9.51 in recent trading, though they still are down 38% over the past 12 months―is the latest move by a large technology company to scoop up key patents. Bidding for intellectual property peaked in June, when a coterie of companies paid $4.5 billion to bankrupt telecommunications-equipment maker Nortel Networks Corp. for 6,000 patents. Calling themselves Rockstar Bidco, Apple Inc., Microsoft Corp. and four others blew away Google Inc.'s $900 million bid.
Intel's move will let it better address the fast-growing streaming video market. Companies have been building their arsenals to fend off lawsuits as competition becomes more heated in markets such as smartphones and tablets.
The company, which dominates the market for PC processors, has been trying to expand into mobile devices, as well as create computers that can better compete with tablets. It announced its first two smartphone partnerships this month, with Chinese PC maker Lenovo Group Ltd. and Motorola Mobility Holdings Inc. planning to introduce phones in 2012. Intel also has been building its software business, buying security software provider McAfee Inc. a year ago.
RealNetworks' CEO, meanwhile, on Thursday said the patent sale allows the company, perhaps best known for its RealPlayer media player, to generate additional capital for investing in new businesses and markets.
The deal is "about realizing this unused asset we've been sitting on for several years," Nielsen said. "Frankly, we're not in the market of making money off our patents like other companies, so we saw the ability to realize that value without having any material impact on our business."
In addition to the sale agreement, RealNetworks and Intel signed a memorandum of understanding to collaborate on future support and development of the next-generation video software and related products.
S&P Capital IQ analyst Scott Kessler noted the deal will substantially boost RealNetworks' balance sheet and is a "constructive way" for Nielsen to create additional value for the company and shareholders.
RealNetworks has been developing the video software over the past four to five years, Nielsen said. It has not yet been deployed to the public but will soon be available for testing and optimization. He estimates it could hit the market in about 12 to 18 months.
Nielsen, who joined RealNetworks as CEO in November, said the technology likely will be licensed to companies for use in smartphones, tablets, PCs, Internet-connected smart TVs, set-top boxes and other devices.
Nielsen said the deal should close in the next 30 to 45 days, with seven RealNetworks employees joining Intel. He said he doesn't expect any issues receiving regulatory approval.
Intel shares, up 23% over the past 12 months, recently were off a fraction to $26.76.
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