Wi-LAN exiting equipment business, focusing on intellectual property

One of the pioneers in the development of broadband wireless equipment Wi-LAN Inc. is exiting the equipment business and will instead focus on making money from its intellectual property (IP) and patent portfolio. The announcement comes several months after the formation of the IP group, and about one month after an executive proclaimed in a conference call that the Calgary company was on track to realizing the vision of its founder. The decision to exit the broadband wireless equipment business comes about a year after the company began assessing itself, trying to create shareholder value and financial profitability, Bill Dunbar, Wi-LAN’s president and CEO said during a February 2 conference call. During this re-evaluation process, "we determined that one of the problems with the company was a lack of focus and people were being pulled from one side to another. So as a result of that we started to focus on our specific areas of value within the company," he stated. This led to the formation of the IP group in August 2005 and also allowed the company to take a closer look at its other capabilities. Dunbar said Wi-LAN was able to come to a better understanding of the value and capabilities of the company’s patent portfolio. Two events happening only weeks apart appeared to solidify Wi-LAN’s board of directors’ decision to exit the equipment making business. Last December the company announced that it had settled its patent dispute with Cisco Systems Inc., which netted Wi-LAN US$10 million. Dunbar said the settlement "strengthened the position of our patents." Then on January 19, the WiMAX Forum announced the first four companies that had been subjected to WiMAX certification testing had passed. Wi-LAN had hoped to submit its own broadband wireless equipment for WiMAX certification in the coming months with the ultimate goal of having products hit the market late this year (RoW, Jan. 10/06w). While this should have been good news for the company, management realized that the financial obligations to maintain activity in the equipment business would have been too onerous in the future. "It became very clear to us and the board that for Wi-LAN to stay in the equipment business per se especially with WiMAX becoming a reality was going to be very, very difficult. It was going to cause a need for a lot of further capital for and it was also going to mean being able to compete against the large players of the telecom industry," Dunbar stated. Discussions have already started with parties interested in buying some or all of the product lines, Dunbar said. He wouldn’t get into specifics with respect to the identities of those interested parties. "I believe we will be successful in finding that are better positioned to exploit as they put them into their own product lines than we’re in a position to do," he said. "The other thing we’d be striving for is to have an ongoing relationship with whoever did both through the licensing process and possibly some technical support." But, Dunbar added, there are no guarantees all of the product lines will be purchased and if that is the case the product line will be shut down. "But it would be in a very managed way that we would actually withdraw because we wouldn’t want to leave our customers hanging. We will make sure that our customers are looked after and that we have under all our warranties that there are opportunities to add to their networks and things like that." The recently formed intellectual property division will now represent the future of Wi-LAN and company executives believe the firm can make a go of it in the market. "This action marks another major step in our strategy to concentrate on a business model that levers our patent and technology position in the face of the transitioning of the broadband wireless market to large equipment suppliers offering high-volume, low margin, standards-based products," Dunbar said in a statement. Dave King, senior VP and GM of the products division, added during last week’s conference call, "As a result of all the work and the creation of our intellectual property division last August, we believe that this is the most profitable future for Wi-LAN and therefore will provide the best return to shareholders by taking these actions." A big step in the right direction for Wi-LAN’s patent or IP strategy was realized when it settled its long-standing dispute with Cisco. And there are more patent arrangements coming in the future, according to the company. "We have had, I would say, very serious and in-depth discussions with some players and we’re hoping that those deals will come to an end or successful completion fairly soon and that we’ll be able to make some announcements," Dunbar stated. "We do have some real serious opportunities and we’ll start to see those come in." Revenue potential arising from these types of agreements are also good, said Dunbar, because these aren’t traditional short-term arrangements. "With these , it’s not just short term, you develop long-term relationships with them as you help them bring their products to market," he added.

Wi-LAN exiting equipment business, focusing on intellectual property

News | February 8, 2006

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