Nortel-the result, we think

Practising putting up an 8 man tent for our family holiday this year was excellent as relaxation time to sit back and think through the likely outcome (s) from tomorrow’s auction. I’ve got two scenarios I was struggling to decide between.

Scenario 1 is a large corporate bid for all of the portfolio. In this scenario, the Auction House Rules seem to allow all bidders to know the current best bid and for several bid rounds to evolve. In other words deep pockets and determination/desire to succeed will win out. Although it is tempting to go for  Apple’s cash reserves (apparently $65.1bn, having added $20bn in 2010-heck that is impressive!!!) or Google (a measly $35bn in cash, adding only $2bn per quarter, amateurs… :-)) I’m just not so sure that either could outbid a determined Chinese consortium bid. Joff over at IAM blog doesn’t think that the Chinese have the cash, but if Huawei, ZTE and others are determined, and they should be, then I’d go for a consortium backed by a Chinese government sovereign fund. Might sound wacky but that is the world of high stakes IP poker for you.

Flip it the other way though and it would seem worth the sellers trying to see if they could satisfy multiple bidders by breaking up the portfolio into chunks just enough to satisfy lots of bidders. Would this create a larger pool for creditors than one single bid? Too complex to manage more than say 3 bids, but worth considering.

There are two hybrids in between these. Hybrid 1 is to ask two large bidders to join together. According to our understanding, two bidders could legally both benefit from being co-owners of the same portfolio and managing it together via a management contract (ask a lawyer, its technically very possible). Hybrid 2 is to combine one large bidder with one or more trolls (give 98% of  the portfolio to a large corporate amongst the three, and a small portfolio of essential patents to IV or any other of the bidding trolls).

Just to confuse the situation even further, there is an uber hybrid combining Hybrid 1 and Hybrid 2, two large corporate winners and a small part reserved for two or more trolls to bid for.

Unlike the sale of the Philips 3G portfolio in, I think, 2008 from memory, the seller has no interest or concern about regulating the bidders and excluding market-disrupting trolls or finance houses. Here the sole interest for this one-time seller is to maximise creditors returns. So selling to a troll is a benefit to this seller and that is why the 2-4G club should be getting agitated. Particularly when an IV man starts turning up at ETSI meetings-imagine that!

 And therefore ladies and gentlemen, boys and girls  our winner (s) is/are a hybrid. Two corporates co-bidding and one troll. For our two corporates we go for Google and a Chinese consortium and our  troll is our and your favourite mystery troll IV. All get what they want and all bid high.

Total sale value in this scenario will be…..$2.75bn. Monstrous but worth it all round and putting IP well on the mainstream business map. And although rumours will abound, nobody will know about IVs bid and success until the knock on the door from the 500 slide man.

Oh, and Coller IP Capital will somehow benefit. Not sure how or why yet but somehow, somewhere Peter Holden will create value from this. This also however will never come out publicly. This fund and these people are so good they don’t even need a website I could link you to.