Cellphone rivals Motorola Inc and BlackBerry maker Research In Motion Ltd have reached a technology licensing agreement, ending more than two years of litigation.
Motorola shares rose 4 percent on Friday as investors turned their focus to the value of Motorola's technology patents, for which RIM will make a one-off payment and pay ongoing royalties.
It's probably somewhat more of a change in perception and a recognition there's some value in Motorola's handset business and its intellectual property, said Jefferies analyst William Choi. The stock's been under pressure along with the rest of the sector on concerns about Europe, but it's probably the one stock that's least exposed to Europe.
Illinois-based Motorola and Canada's RIM have been sparring over technology patents since a previous pact expired in December 2007.
They said they have now come to a cross-licensing deal on intellectual property, allowing them to exchange technology and transfer patents.
The pact is seen taking away the distraction of litigation and help both companies concentrate on competing better against rivals such as iPhone maker Apple Inc.
Since they did not disclose financial terms, analysts said it was difficult to measure what the deal will mean to either company's bottom line.
But UBS analyst Maynard Um said in a research note the agreement would also help Motorola reach its profitability goal for its handset business for the fourth quarter of 2010.
The pact covers several different types of high-speed wireless technologies including Wi-Fi, the popular short-range radio technology, and emerging fourth generation (4G) standards.
This leads the way for both companies to develop 4G products to potentially deliver to some of the biggest U.S. service providers, which are currently on upgrading to 4G.
Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc, has said that both Motorola and RIM may be among the first to sell 4G handsets in early 2011.
It is a common practice for technology companies to engage in prolonged legal battles in the hope of gaining the upper hand in negotiations for licensing agreements.
For example, Apple and smaller rival HTC Corp are currently engaged in a bitter legal battle over patents.
While RIM has a strong following among business customers, both the Canadian company and Motorola have lost out to rivals such as iPhone in recent years.
The pact follows a complaint filed by Motorola against RIM in January at the U.S. International Trade Commission to prohibit BlackBerry sales in the United States, traditionally RIM's most important market.
Motorola had said most RIM products infringed its patents.
The companies have been in court battles with each other since February 2008 due to their failure to renew a pact that had allowed them to use each others' technology.
After the news, Motorola shares rose 29 cents or 4 percent to $7.13 on the New York Stock Exchange. Its shares have fallen 7 percent since mid-April.
RIM's U.S. shares were down 19 cents or 0.32 percent at $59.92 on Nasdaq. RIM shares have fallen 20 percent since mid-April.
(Reporting by Sinead Carew, additional reporting by Ritsuko Ando; Editing by Phil Berlowitz)