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Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

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Self-Driving Cars Creating New Investment Options

Self-Driving Cars

With the push to develop self-driving cars, telecommunication companies are looking to simplify the process for providing the automotive industry patented technology. Self-driving cars will need to rely on advanced computers that can flawlessly connect to other nearby cars and devices. This means the creators of these computers will require royalties, as per their patents. The technologies and corresponding patents needed to create self-driving vehicles are creating new investment opportunities for investors.

For self-driving vehicles, the technology in question is similar to your phone playing music in your car via Bluetooth. A license agreement is a necessary deal between the car and phone companies, otherwise your music won’t play or your phone won’t charge. Many automakers are working to create self-driving cars, an extremely technical field that will require the use of uncommon partners’ technology. In today’s day and age, patents are created for each new car and phone model, meaning dozens of lengthy license agreements. This new hybrid field of computerized cars is sure to cause these companies headaches.

To make the transition into the future easier, the company Avanci has partnered with telecom firms Qualcomm Inc., Ericsson AB, ZTE Corp. and Royal KPN NV. Avanci is a one-stop marketplace that standardizes the legal process and completes the license agreements at fair flat rates based on the technology. This mediator will simplify the process, allowing manufacturers to focus on production. The new market place should help Qualcomm, Ericsson, and other telecommunications firms to capitalize on self-driving cars without having to worry as much about the threat of lengthy and expensive patent litigation.

Avanci is increasingly trying to capitalize on the Internet of Things, the basic wireless connection of different machines to one another. This includes self-driving cars, but it also includes companies that create smart meters, the devices that regulate your electricity consumption. Companies like Itron and Honeywell are working to integrate these devices with smartphones and potentially cars so they react –adjust the temperature, turn off your water- when you leave or return home.

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Having only gotten its start in April, Avanci is still privately owned. Their idea is original and unshared by any other company. As Avanci gains attention, we will likely see similar companies enter this market. Avanci creates an opportunity for more efficient technology patent deals and it should be a long-term partner for many major tech companies. Given its business model, it would also not be surprising if the firm became a takeover target for one of the intellectual patent holding firms like IDCC.

Avanci’s growth and success in IOT is a small victory for the Avanci-aligned telecom companies. Major firms like Apple and Microsoft in the phone industry often set the licensing rates at prices that are too high for smaller companies to compete with. Qualcomm, Ericsson and InterDigital now have the opportunity to fairly provide licenses at a reasonable rate across a broad spectrum of customers. This is a win for smaller telecom companies and would be an ideal long-term investment choice. All three of these companies’ stocks jumped in price on Wednesday with Avanci’s announcement. Apple and Microsoft however, could report losses if they don’t find a way to enter the market.

Avanci believes their services will greatly benefit Ford Motor Co. who is new to requiring patented technology in their cars. Honeywell International is a common producer of thermostats and will likely require Avanci’s help as they become more mindful of smart meters. Honeywell’s stock moved $1.25 on Wednesday following the announcement. Both of these businesses are about to enter new markets that will completely rely on this service.

As self-driving cars become more prominent and the Internet of Things continues to grow, the demand for these types of patents will increase. With Avanci becoming more popular, the customers they aid in both the auto and telecom industries will realize substantial benefits. Wise investors should pay attention to the developments in the space.

By Michael McDonald of Oilprice.com

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