by: David Pridham
As Yahoo YHOO +0.76% prepares to auction nearly 3,000 of its patents, some commentators say it could generate more than $1 billion. A few even believe it could fetch up to $3 billion.
But those estimates are unrealistically high — by a factor of 10, in fact. According to our analysis, based on publicly-available information as well as our proprietary technical and market-based “IPedia” analytics platform, Yahoo’s patents are actually worth no more than $200 million, and may be worth as little as $50 million.
To those not familiar with the Yahoo patent sale, the company is looking to divest approximately 2,648 IP assets (while retaining an additional 700 patents that it calls “core” to sell along with its operating business). To effectuate this transfer Yahoo has assigned these assets to a transaction vehicle known as Excaliber IP. Many of these patents are homegrown Yahoo assets, but some were acquired in strategic IP-rich acquisitions such as Yahoo’s $1.63 billion purchase of Overture in 2003, which owned AltaVista, an early Google search competitor.
In doing our valuation, we first looked at the IPedia scores of these patents, which are based on thousands of data points such as the patents’ claim strength, priority dates, reverse and forward citations, technology areas, market adoption, “key player” performance trends (assignee, inventor(s), examiner, art unit, etc.), transaction histories, litigation histories and comparable license and sale figures (compiled from our proprietary IPedia transaction database as well as public information). Not surprisingly, the IPedia analysis indicated noteworthy vulnerabilities in the Yahoo portfolio that I will address below.
We also examined recent Yahoo patent sales between 2011-2015. These generated approximately $300 million in revenues from prominent high-tech companies such as LinkedIn, Alibaba, Snapchat, and Huawei, among others.