Nokia Oyj shares fell the most in nine months after an award from a Samsung Electronics Co. patent dispute fell short of analysts’ estimates, a sign that extracting royalty revenue from smartphone makers is becoming challenging as global demand for handsets slows.
The shares dropped as much as 13 percent, the steepest intraday decline since April 30, and were down 12 percent at 5.82 euros as of 10:53 a.m. in Helsinki, wiping out about 4.3 billion euros ($4.7 billion) from its market value.
An arbitration court of the International Chamber of Commerce settled the amount of additional compensation Samsung needs to pay to Nokia, the Finnish company said Monday in a statement, without providing exact financial details. The ruling could lead to annual revenue of as much as 200 million euros from Samsung, Sebastien Sztabowicz, an analyst at Kepler Cheuvreux, said in a note to clients. He had predicted as much as 250 million euros.
The award is "well below consensus and broader expectations in the market," Janardan Menon, an analyst at Liberum Capital Ltd. in London, said in a note to clients. He said it’s difficult to extract more royalty revenue from smartphone makers given the slowing demand for handsets.
Nokia’s patent-licensing business now has a annual revenue run rate of about 800 million euros. Nokia’s technologies division, which licenses its patents, had fourth-quarter sales of about 400 million euros and full-year 2015 sales of about 1.02 billion euros, it said.
Nokia is the latest wireless-equipment maker to settle a patent dispute with a handset maker challenging the value of patents it uses to make smartphones. The high-margin sales made from licensing such technology is crucial to boosting profitability, especially when operators are spending less on wireless infrastructure equipment. Swedish rival Ericsson AB and Apple Inc. settled a legal dispute in December over mobile-device patents.
Nokia’s technologies unit generated about 20 percent of the company’s 475 million euros of third-quarter operating profit with an operating margin of 58 percent, far above the 13.6 percent generated by its networks business. Nokia is set to report fourth-quarter earnings Feb. 11.