Microsoft and LG announce patent deal

Microsoft and South Korea's LG Electronics said on Thursday they have agreed a patent cross-licensing deal, sending LG shares to their highest value in more than a year.

Under the agreement, LG can use Microsoft-patented technology in its products, including Linux-based embedded devices, while Microsoft will have access to LG's patents and will license other patents developed by the Korean firm.

Song Min-ho, an analyst at CJ Investment &Securities, noted LG has patents that can be applied to Microsoft's Xbox game console.

Shares in LG Electronics rose as much as 5.2 percent to their highest value since May 2006, before closing up 3.4 percent at 73,200 won (£39).

Analysts said the flat screen and handset maker's stock had already been gaining on the back of recent broker upgrades, but Thursday's sharp gains were triggered by the Microsoft news.

No financial details of the deal were disclosed, but analysts predicted it would bring in more revenues for LG Electronics as Microsoft eyes demand for high-data products and services while the line between consumer gadgets and PCs blurs.

"This capped four years of negotiations between LG and Microsoft," LG Electronics spokeswoman Judy Pae said. "The amount Microsoft pays LG is much bigger than what LG pays Microsoft, but I can't go into financial details."

Cho Sung-eun, an analyst at Mirae Asset Securities, said: "I expect the agreement could become a big earnings driver for LG Electronics, especially given Microsoft's plans to expand its home-networking business in two or three years. It's potentially a huge market."

"Given its prominent position in the appliances business, LG could be a major beneficiary from a home-networking deal with Microsoft," he added.

Analysts said the deal would positively affect LG's patent negotiations with other technology companies and stem the flurry of patent-violation lawsuits common in the industry.

Greg Roh, an analyst at Korea Investment &Securities, reckons LG Electronics will post second-quarter net profit of 270bn won (£146m), reversing last year's 9.7bn won (£5.2m) loss and the first quarter's 122.6bn won (£66.62m) net loss.

Lehman Brothers and Citigroup, among others, have recently raised their LG earnings forecasts, citing improvements in the mobile phones division.

Related Links:

• Go back to category Business to read more reviews and articles.
• Go back to Software Magazine's main page.