Jefferies performed a deep dive on 1,400 patents to determine the firms with essential LTE patents, in consultation with industry experts.

We also analyzed the three required smartphone patent areas (Wireless, OS/Software, Hardware), said Peter Misek, an analyst at Jefferies. Due to the dearth of companies with substantial patent portfolios in all three areas, we conclude that the patent wars are far from over. Also, the data supports our positive Apple Inc. thesis and cautious RIM thesis.

He said Apple Inc. has patent strength in hardware and OS/Software and it could be stronger in wireless. Apple's wireless position improved with its share of the Nortel Networks patents, but it still trails many of its competitors.

If Apple were to acquire InterDigital's solid LTE patent portfolio, it would create the strongest smartphone intellectual property portfolio, allowing Apple to avoid license fees (lowering its costs) while requiring competitors to pay license fees (raising their costs).

InterDigital is soliciting takeover offers, and he believes Apple and Microsoft are likely the primary bidders, but media reports have also pointed to Nokia, Ericsson, Samsung, HTC, Intel, and Qualcomm as bidding.

Except for HTC, the latter group has fairly strong wireless patent portfolios. Another potential bidder for InterDigital's patent portfolio could be Facebook if it acquires HP's WebOS, he said.

The BlackBerry maker's patents are only minor portion of salvage value. He believes the liquidation value of RIM's patents is only about $2.5 billion. With an ongoing handset business, RIM's patent monetization value is likely only $1 billion, supporting his $21 cash cow salvage valuation.

Motorola Mobility appears to have been bought mostly for its patents. Google Inc. bought Motorola Mobility for $12.5 billion. He estimates the Home (set-top box) business to be $1.5 billion, patents $5 billion to $7 billion ($3 billion for LTE-related), and $3 billion cash, leaving the handset business at $1 billion to $3 billion.

This implies Google mainly bought Motorola Mobility for its patents but also places some value on its hardware business, he said.

Three main patent pools in smartphones: OS and software, hardware, wireless. He believes work-arounds are much easier for the OS and software, and that customers are often covered by their semiconductor and component suppliers' patents.

This has made wireless patents the primary battleground. However, unless companies have substantial portfolios in all three areas (e.g., Nokia, IBM), they are likely to be still embroiled in the patent wars. His analysis focused on LTE (i.e., 4G) as it will become a key requirement.

Most attempts to value patents focus either on counting the total number of patents a company has, but the important number is the number of essential patents, counting the essential patents in the ETSI library, but this data is self-reported, he said.

Alternatively, the essentiality of LTE patents can be determined by lawsuit decisions (none yet), licensing agreements, or purchases. Of the latter two, there is no public data apart from the $4.5 billion purchase of Nortel's patent portfolio, he said.

Industry experts screened thousands of patents and then individually analyzed 1,400 patents to determine their essentiality to the LTE standards. Then Misek analyzed Nortel's portfolio, estimated how much of the purchase price was for the LTE patents, and used this value as a reference for other companies' portfolios.

Our analysis determined that Nortel has 4 percent of the essential LTE patents and was worth $1.35 billion (30 percent of $4.5 billion), said Misek.

This, compared to LG, was worth 23 percent ($7.9 billion), Qualcomm was worth 21 percent ($7.3 billion), Motorola Mobility was worth 9 percent ($3.3 billion), InterDigital was worth 9 percent ($3.3 billion), Nokia was worth 9 percent ($3.1 billion), Samsung was worth 9 percent ($3.1 billion), ZTE was worth 6 percent ($2.1 billion), Ericsson was worth 2 percent ($600 million), RIM was worth 1 percent ($400 million), and Huawei was worth 1 percent ($200 million).

In geographies and industries where cross licensing, foreign ownership, competition, and asset transfer restrictions are present, a significant discount should be applied, he said.