Skip to main content

The Globe and Mail

Bid for Nortel patents marks Google's new push into mobile world

Google co-founder Larry Page must prove that his aloofness, rebellious streak and affinity for pursuing wacky ideas won’t alienate investors and lead the company astray. He’s taking over amid emerging threats from rapidly growing rivals and more vigilant regulators alike.

Virginia Mayo/The Globe and Mail

Google Inc. is vying for the valuable remains of a fallen Canadian technology giant as the Internet search king branches further into the rapidly evolving world of social networks and wireless communication vital to its future.

The web search and online advertising giant is bidding $900-million (U.S.) for about 6,000 Nortel Networks Corp. patents, marking a bold first day for Google's new CEO, as well as raising intriguing questions about where else Google might move.

The so-called "stalking horse" bid sets a ballpark figure for a bidding process in June in which global technology giants will battle it out for the last meaningful assets within storied Nortel, which stumbled out of the bubble and eventually succumbed to a crushing debt burden and plunging sales. The only thing left: Its vast cache of intellectual property, patents relating to everything from advanced Internet search and social networking to 4G wireless technologies and semiconductors.

Story continues below advertisement

That has industry analysts pondering exactly where else Google's co-founder and newly minted CEO Larry Page - who took over on Monday from outgoing overseer Eric Schmidt - wants to take the web-search king as it begins a new phase. The company is moving from an era of explosive growth to one in which social-networking companies such as Facebook and Groupon are challenging the dominance of Google's online advertising platform, stealing its most brilliant employees and attempting to become consumers' primary portal to the web.

Google argued in an official blog post that the move was purely defensive, that it was designed to fend off the increasingly common patent infringement lawsuits that ricochet around the high-tech industry as it expands into the mobile world with its wildly popular Android operating system, which runs on smart phones made by HTC, Samsung and others.

But Google has already moved from Internet search into telecommunications infrastructure, social networks and voice-over-Internet protocol (VoIP) phone service, although no one expects Google to become a fully fledged wireless network builder or operator, where the profit margins are much slimmer than in online advertising.

Jennifer Pigg, a vice-president in network research at the Yankee Group research firm in Boston, said she expected to see networking equipment companies that competed with Nortel - such as Nokia Siemens Networks - lead the bidding for its prized patents.

"I was extremely surprised to see Google's name there, and it only goes to show that you shouldn't be surprised to see Google's name anywhere," Ms. Pigg said. "I do not buy that this is a purely defensive move. They'll use this technology."

But what for? Ms. Pigg and others assume Google may be interested in using the patents to help manage its vast array of servers. Any deal would require regulatory approval in both the United States and Canada.

At the same time, other tech superstars are very likely to be interested in submitting bids in a process that could send the final price tag soaring well beyond $1-billion. In particular, BlackBerry-maker Research In Motion Ltd. of Waterloo, Ont., complained bitterly that it was shut out of buying Nortel's wireless assets in one of the many previous auctions.

Story continues below advertisement

Those assets eventually went to the Swedish wireless network-builder Ericsson, which many suspect will be interested in the patents that Google is now after.

A sale to Google could result in more hand wringing about the loss of key Canadian intellectual property to a foreign technology company.

With Mr. Page at the helm, the Mountain View, Calif.-based company is embarking on a markedly different era than that of Mr. Schmidt - who was offering what he called "adult supervision" to the visionary company's young founders. That has Google pushing more aggressively into the mobile world, which is dominated by a variety of huge builders of handsets and networks such as Nokia Corp., Apple and Ericsson at a time when it is the norm to file patent infringement lawsuits against competitors encroaching on embattled turf.

Charles Golvin, a principle analyst at Forrester Research, said Google's initiatives beyond its core competencies - such as bidding for wireless spectrum licences or building an ultra-fast fibre-optic network in Kansas City - are strategic, and don't necessarily represent the company branching boldly into a new business area.

"Google's lawyers see much more clearly than I do what patent litigation they're open to - they're the ones who are best in a position to judge," he said, noting that this investment could, theoretically, insure the company against some very expensive litigation.

Another reason to believe that Google doesn't want to stretch too far into networks or data servers, he noted, is that "Google would be crazy to trade their [profit]margins for the margins of any of those businesses. It doesn't make sense to look at those businesses as a growth opportunity."

Story continues below advertisement

Whatever the outcome, and whichever company ends up with the patents, one thing will be certain: Nortel Networks, as Canadians and the world knew it, will be no more. The patents represent the last kernel of value in the corporate husk that is Nortel Networks in 2011. Although the patents could have been licensed out and would generate revenues on their own, the company has clearly chosen to cash out on them now.

That, of course, means the official demise of Nortel, which was an anchor for Canada's high-tech community in its heyday. The company has already sold off its real estate. The auction is expected to help Nortel's bond holders reap a return, but is unlikely to do anything for Nortel's common shareholders.

"If this comes to pass, then it really is all over, except for the crying and the hurting about what Nortel meant for Canada," said Lawrence Surtees, an analyst with IDC Canada. "Put a fork in it. It's done."

Report an error Editorial code of conduct Licensing Options
As of December 20, 2017, we have temporarily removed commenting from our articles. We hope to have this resolved by the end of January 2018. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to If you want to write a letter to the editor, please forward to