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H-P to License Camera-Phone Technology
TheStreet.com



Hewlett-Packard wants a piece of the camera-phone market.

The Palo Alto, Calif., company said Tuesday that its photo-enhancing technology will be available on camera-equipped cell phones next year.

The announcement is the latest deal to come out of H-P's growing intellectual-property licensing group and could help the company tap into the next big thing in consumer photography.

The technology, which was originally designed for H-P's own line of digital point-and-shoot cameras, improves picture quality by automatically correcting and enhancing images.

While cell-phone pictures are typically grainy, spur-of-the-moment snapshots that are deleted after being viewed, H-P hopes its technology will prompt more consumers to print the images and save them in the same way they do with photographs taken with cameras -- not a bad thing for a company whose most profitable business is printers, ink cartridges and paper.

H-P is licensing the imaging technology to Flextronics(FLEX:Nasdaq), a Singapore-based contract manufacturer, which designs and assembles camera-phone modules and cell phones. Flextronics will pay H-P an undisclosed royalty for camera modules featuring its intellectual property.

"Flextronics is the ideal partner to harness the capabilities of H-P's digital-imaging technology to open new markets," H-P Imaging and Printer Group VP Tara Bunch said in a statement. "The agreement is a breakthrough for the booming camera-phone market because it will transform photos into higher-quality images and keepsakes to share and print."

The deal is the latest of roughly 300 IP deals inked by H-P's nearly four-year-old intellectual-property licensing group, which was created to turn the company's rich trove of patents and copyrights into new revenue streams.

H-P owns roughly 30,000 parents worldwide, and was the third-largest issuer of new patents in the U.S. in 2005, according to the company.

In April, H-P officials said the division has generated more than $200 million in value since its inception. The company defines value as including everything from licensing royalty revenue to product discounts garnered in exchange for licenses and relief from liability.

H-P officials declined to update that figure earlier this week, stating that the company is not providing financial information on the licensing division or the Flextronics deal.

How much of a royalty H-P will garner from each camera-phone module or how many units are envisioned in the five-year deal is unknown. According to H-P officials, Flextronics will license the software for camera modules that capture images at three megapixel quality and above, a segment that will account for anywhere between 5% and 13% of the more than 600 million camera phones expected to be shipped in 2007, according to various analyst estimates.

The company also wouldn't say whether the deal with Flextronics is exclusive.

Analysts expect H-P to earn 64 cents a share on sales of $24.1 billion when it reports third-quarter results Thursday.

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