How Apple Inc. (AAPL) Patent Deal Is Positive To HTC?

According to a report from CLSA, the patent-licensing deal that was announced on Saturday between Apple Inc. (NASDAQ:AAPL) and HTC Corp (TPE:2498) is positive for the Taiwan firm.

How Apple Inc. (AAPL) Patent Deal Is Positive To HTC?

The two companies signed a 10-year deal that will extend to certain patents held by both. HTC Corp (TPE:2498) was the first Android smartphone maker sued by Apple Inc. (NASDAQ:AAPL) in March 2010, when it was the largest Android producer at that time. HTC will book a one-off payment in 4Q 2012 to shore up the royalties for devices shipped before this settlement. Ongoing royalty payments to Apple will also hurt HTC’s gross margin in 2013.

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While Apple Inc. (NASDAQ:AAPL) has struck a patent deal with Nokia Corporation (NYSE:NOK) and Microsoft Corporation (NASDAQ:MSFT), the deal with HTC marks the first time that Apple has settled with an Android phone maker. HTC said in a statement that its licensing payments to Apple would have “no material impact on the finances of the company”. Terms of the deal were not disclosed to public. However, analysts from CLSA believe that Apple retains the right to sue HTC if the Taiwan firm copies things outside of what is approved in this agreement.

Is HTC a threat to Apple?

The research firm believe one of the key reasons that Apple Inc. (NASDAQ:AAPL) is willing to settle with HTC Corp (TPE:2498) is because HTC is no longer a major threat in the smartphone business. Sony overtook HTC to become the second-largest Android phone maker and the third-largest smartphone makers in 3Q12. Samsung Electronics, with a smartphone market share of 30% in Q3 2012, is Apple Inc. (NASDAQ:AAPL)’s key target of legal actions.

How Is Patent-Deal Positive To HTC?

Note that HTC’s devices were stopped by US customs in late May this year due to its legal disputes with Apple Inc. (NASDAQ:AAPL). This hurt HTC’s credibility at its carrier partners. The CLSA research firm view this settlement positive to HTC as its management can refocus on product development instead of compromising user experience in order to avoid Apple’s patents.

Despite ending its patent battle with HTC, Apple Inc. (NASDAQ:AAPL) is still in a tussle with two tech giants, Samsung and Google’s Motorola Mobility.