Apple Inc. (AAPL), HTC Litigation Settled: What’s The Implication?

Updated on

Apple Inc. (NASDAQ:AAPL) settled its patent litigation with HTC Corp (TPE:2498), setting what could be a possible precedence for future patent lawsuits. Apple Inc. (NASDAQ:AAPL) is still in a tussle with Samsung Electronics Co., Ltd. (LON:BC94) and Google Inc (NASDAQ:GOOG)’s Motorola Mobility. According to the agreement, Apple Inc. (NASDAQ:AAPL) is likely to get approximately $6-$8 per smartphone, which would translate to about $180-$280 million as per the estimated 30-35 million Android smartphones sales by HTC in 2013.

Apple Inc. (AAPL), HTC Litigation Settled: What's The Implication?

However, according to Sterne Agee research analyst, Shaw Wu, this kind of revenue is likely to be immaterial to Apple Inc. (NASDAQ:AAPL)’s performance metrics. The analyst pointed to the massive revenue that the iPhone maker expects to post in 2013, estimated at about $193 billion, as one of the major benchmarks diminishing the possible impact of the new revenue stream (patent litigation fees). The only likely benefit is implicated in terms of profit margins as the COGS Cost of Goods Sold expense is next to nothing.

However, due to the minimal impact of the revenue generated from the litigation fees, the analyst predicts that Apple is likely to categorize the amount under other income, thereby ruling it out completely from the company’s operating metrics.

The analyst also points to the likelihood of this settlement setting up a blueprint for other litigation battles. The analyst said, “with both Samsung and Motorola (which is owned by Google Inc (NASDAQ:GOOG), still under litigation with AAPL, the big question is whether they are closer to a settlement. We think the answer is yes and the terms set with HTC could at least provide a blueprint”.

The analyst also believes that it would be fair for Apple Inc. (NASDAQ:AAPL) to receive some licensing revenue from intellectual property, which it has developed over time, especially, the multi-touch gestures in making the modern, smartphone and tablet with touchscreens. The analysts also highlighted that, prior to the iPhone and iPad, there were arguably no products that were close in functionality and appearance.

Sterne Agee analysts maintained a Buy rating on Apple Inc. (NASDAQ:AAPL), as they continue to foresee the tech giant Outperforming in the tough economic conditions with its strategic and structural advantages and its vertical integration. Contrary to many smartphone manufacturers, Apple Inc. (NASDAQ:AAPL) is the only company that manufactures both the software and smartphone gadgets.

Google Inc (NASDAQ:GOOG) is the manufacturer of Samsung Electronics Co., Ltd. (LON:BC94)’s Smartphone platform, Android, which is also the market leader, while Microsoft Corporation (NASDAQ:MSFT) provides the platform to the likes of Nokia Corporation (NYSE:NOK), and HTC Corp (TPE:2498), among others. Research In Motion Limited (TSE:RIM) (NASDAQ:RIMM) does have some vertical integration with its BlackBerry platform and smartphone gadgets production, but its dwindling market share seems to be eating on all the benefits.

At the time of this writing, Apple Inc. (NASDAQ:AAPL) was trading at $549.66 per share, up $2.60, or a 0.48% increase from the previous close.

Leave a Comment