Wireless LAN vendor Aruba Networks Inc said it will pay Motorola Inc $19.8 million to settle certain long-drawn patent disputes that were a drag on Aruba's earnings.
Shares of Aruba rose as much as 4 percent to $8.78 on the news.
The two-year-long disputes involved patents owned by both the parties and the out-of-court settlement includes a cross-licensing agreement, the companies said in a joint statement.
Aruba will account for the settlement payment as a one-time expense for the fiscal first quarter ended Oct. 31, the company said in a filing.
Part of that is positive as it is a one-time charge for Aruba, Brigantine Advisors analyst Joanna Makris said.
The patent lawsuit was a really big overhang and was costing Aruba about a penny per share per quarter, the analyst said.
In August, Aruba had expressed concerns about increasing expenses related to the lawsuit.
I believe Aruba has over $120 million in cash and short -term investments, so it is not a drain on cash balance. But what is positive about it is that it puts an end to the drama at this point and the settlement has been achieved, Makris said.
The legal battle dates back to August 2007, when Motorola's subsidiary companies Symbol Technologies and Wireless Valley Communications filed a lawsuit against Aruba on concerns that Aruba had infringed patents related to wireless local area network (WLAN) communication technologies.
In September 2008, Aruba filed a countersuit against Motorola and its subsidiaries, alleging infringement of two patents related to managing wireless computer networks and network security.
The settlement could benefit Aruba in other ways, too.
Additionally, we are actively exploring technical and business opportunities of mutual interest associated with the all-wireless enterprise, Gene Delaney, president of Motorola's enterprise mobility solutions business, said.
Makris said the collaboration element is really interesting.
It seems to imply that Aruba may be able to leverage some of Motorola's channel, and (Aruba's) geographic graph could potentially expand on that down the road, she said.
The analyst said it seems like Motorola wants to start to focus on the WLAN business, and that they might look for an acquisition and could view Aruba as a channel partner.
But for sure, I could see Motorola being interested in an acquisition in the space, she said.
Shares of Aruba were trading up 31 cents at $8.75 in midday trade Friday on Nasdaq.
(Reporting by Shrutika Verma in Bangalore; Editing by Maju Samuel, Unnikrishnan Nair)