ITC sales ban on old iPhones, iPads predicted to have minimum financial impact on Apple
Though Apple lost an International Trade Commission ruling this week to Samsung and sales of the iPad 2 and iPhone 4 must be suspended in the U.S., those legacy products are already on the way out, suggesting to market watchers that the financial impact will be minimal.
Maynard Um of Wells Fargo Securities said while the headline news is negative for Apple, he believes there will not be much of a hit to the company's bottom line. In particular, he expects Apple to introduce a new iPhone in September and in the process phase out the iPhone 4, which means the ITC ban would only affect six weeks of shipments.
If the ban were to prevent Apple from selling 1.5 million iPhone 4 units, it would only affect the company's September quarter earnings per share by 24 cents, or 3 percent of Um's current $7.46 estimate.
Separately, analyst Gene Munster of Piper Jaffray said Wednesday he sees the ITC ban affecting Apple's June and September revenue by up to 1 percent, or $680 million. The injunction has not swayed him to drop his "overweight" rating for AAPL stock.
Munster also expects that the iPhone 4 will be discontinued in September, when he anticipated Apple will release its next-generation "iPhone 5S." Apple has historically offered the last two generations of iPhones at a discount in addition to its latest flagship handset.
"The actual impact will likely be less than 1 percent given AT&T customers that would not have a chance to purchase an iPhone 4 could buy an iPhone 4S or 5 instead," Munster said. "Given the iPhone 4 will likely be retired at the end of September, there should not be an impact after the September quarter."
The ITC ban, announced on Tuesday, only applies to AT&T variants of the iPhone 4, iPhone 3GS, and 3G_capable versions of the first-generation iPad and iPad 2. Among those, the iPhone 4 is the only product with measurable sales, accounting for about 8 percent of total Apple revenue in the March 2013 quarter.
Those devices were found by the ITC to have infringed on Samsung's U.S. Patent No. 7,706,348, named "Apparatus and method for encoding/decoding transport format combination indicator in CDMA mobile communication system," which is a deemed standard essential UMTS wireless technology.
Apple has already vowed to appeal the ITC decision in an effort to overturn it. But by the time that process carries out, the iPhone 4 and iPad 2 ??the only two barred devices that Apple continues to sell ? may already be pulled off the market in favor of newer models.
Maynard Um of Wells Fargo Securities said while the headline news is negative for Apple, he believes there will not be much of a hit to the company's bottom line. In particular, he expects Apple to introduce a new iPhone in September and in the process phase out the iPhone 4, which means the ITC ban would only affect six weeks of shipments.
If the ban were to prevent Apple from selling 1.5 million iPhone 4 units, it would only affect the company's September quarter earnings per share by 24 cents, or 3 percent of Um's current $7.46 estimate.
Separately, analyst Gene Munster of Piper Jaffray said Wednesday he sees the ITC ban affecting Apple's June and September revenue by up to 1 percent, or $680 million. The injunction has not swayed him to drop his "overweight" rating for AAPL stock.
Gene Munster of Piper Jaffray noted that some customers who may have bought an iPhone 4 could instead opt for Apple's more recent iPhone 4S or iPhone 5 models.
Munster also expects that the iPhone 4 will be discontinued in September, when he anticipated Apple will release its next-generation "iPhone 5S." Apple has historically offered the last two generations of iPhones at a discount in addition to its latest flagship handset.
"The actual impact will likely be less than 1 percent given AT&T customers that would not have a chance to purchase an iPhone 4 could buy an iPhone 4S or 5 instead," Munster said. "Given the iPhone 4 will likely be retired at the end of September, there should not be an impact after the September quarter."
The ITC ban, announced on Tuesday, only applies to AT&T variants of the iPhone 4, iPhone 3GS, and 3G_capable versions of the first-generation iPad and iPad 2. Among those, the iPhone 4 is the only product with measurable sales, accounting for about 8 percent of total Apple revenue in the March 2013 quarter.
Those devices were found by the ITC to have infringed on Samsung's U.S. Patent No. 7,706,348, named "Apparatus and method for encoding/decoding transport format combination indicator in CDMA mobile communication system," which is a deemed standard essential UMTS wireless technology.
Apple has already vowed to appeal the ITC decision in an effort to overturn it. But by the time that process carries out, the iPhone 4 and iPad 2 ??the only two barred devices that Apple continues to sell ? may already be pulled off the market in favor of newer models.
Comments
Huh? They did order an injunction on certain HTC devices infringing on Apple's IP. I'm surprised you don't remember that.
http://www.pcmag.com/article2/0,2817,2397832,00.asp
The ITC also issued an injunction order on Motorola devices deemed to infringe on a Microsoft patent.
http://www.fosspatents.com/2012/05/itc-orders-import-ban-against-motorola.html
The ITC has no other cure option in the event they find for patent infringement.
My guess is the only hit Apple will take from all this is not lost sales, but the added cost of needing more inventory space for all the additional pallets of iPhone 4 devices they imported to the USA before yesterday.
Customer : iPhone 4 contract for $49 please
Sales Rep: Sorry, we dont have any and will not be getting any more in, but I can give you a 4S for $79
Customer : OK, go on.
More revenue for Apple.
They're assuming that the ban will start in exactly 60 days. Apple has already said they will appeal so I think the chance the ban actually comes into effect is slim. Should be easy to drag this out a couple more months and turn that "minimal" impact in "zero" impact.
Or Apple could turn this around. Have a fire sale and sell off old models at steep discounts to clear inventory. Makes their minimal loss even smaller and gives them some good will with customers (and AT&T).
Additional pallets of infringing iPhone 4's would be seized too if the ban is allowed to stand. the ITC also ruled for a Cease-and-Desist order meaning even existing domestic stock could not be sold.
The answer I would like to know is WHO has to pay the essencial patents rights? Qualcomm or Apple? The need to clarify this.
and Obama specificly said the US would stop banning sales of products on essencial patents dispute. and then they do it anyway...
Quote:
Originally Posted by Gatorguy
Additional pallets of infringing iPhone 4's would be seized too if the ban is allowed to stand. the ITC also ruled for a Cease-and-Desist order meaning even existing domestic stock could not be sold.
Could you provide a source for this? Everything I have read asserts that this was an import ban, not a sales ban.
Quote:
Originally Posted by Gatorguy
Huh? They did order an injunction on certain HTC devices infringing on Apple's IP. I'm surprised you don't remember that.
http://www.pcmag.com/article2/0,2817,2397832,00.asp
The ITC also issued an injunction order on Motorola devices deemed to infringe on a Microsoft patent.
http://www.fosspatents.com/2012/05/itc-orders-import-ban-against-motorola.html
The ITC has no other cure option in the event they find for patent infringement.
See below Mr Disingenuous, "cease and desist".
Quote:
Originally Posted by manicakes
Apple executives were not born yesterday. Certainly they knew there was a chance of an import ban on these products before the ruling. Given this information, I'd be blown away if they didn't fill their USA sales channels with enough product to last until product refresh time.
My guess is the only hit Apple will take from all this is not lost sales, but the added cost of needing more inventory space for all the additional pallets of iPhone 4 devices they imported to the USA before yesterday.
The ITC took the further step of issuing a cease and desist order, meaning if the order is enforced Apple will not be able to sell existing stock.
Yes sir.
http://www.iclarified.com/30778/itc-finds-apple-infringed-on-samsung-patent-issues-cease-and-desist-order-on-older-iphones-ipads
"Notice is hereby given that the U.S. International Trade Commission has found a violation of section 337 in this investigation and has issued a limited exclusion order prohibiting respondent Apple Inc. of Cupertino, California (“Apple”), from importing wireless communication devices, portable music and data processing devices, and tablet computers that infringe claims 75-76 and 82-84 of U.S. Patent No. 7,706,348 (“the ’348 patent”). The Commission has also issued a cease and desist order against Apple prohibiting the sale and distribution within the United States of articles that infringe claims 75-76 and 82-84 of the ’348 patent. The Commission has found no violation based on U.S. Patent Nos. 7,486,644 (“the ’644 patent”), 7,450,114 (“the ’114 patent”), and 6,771,980 (“the ’980 patent”). The Commission’s determination is final, and the investigation is terminated.
Quote:
Originally Posted by manicakes
Could you provide a source for this? Everything I have read asserts that this was an import ban, not a sales ban.
"The Commission has determined that the appropriate remedy is a limited exclusion order and a cease and desist order prohibiting Apple from importing into the United States or selling or distributing within the United States wireless communication devices, portable music and data processing devices, and tablet computers that infringe claims 75-76 and 82-84 of the ’348 patent. The Commission has determined that the public interest factors enumerated in section 337(d)(1) and (f)(1) do not preclude issuance of the limited exclusion order and cease and desist order."
Source (pdf)
Quote:
Originally Posted by Gatorguy
Huh? They did order an injunction on certain HTC devices infringing on Apple's IP. I'm surprised you don't remember that.
http://www.pcmag.com/article2/0,2817,2397832,00.asp
The ITC also issued an injunction order on Motorola devices deemed to infringe on a Microsoft patent.
http://www.fosspatents.com/2012/05/itc-orders-import-ban-against-motorola.html
The ITC has no other cure option in the event they find for patent infringement.
My initial post was poorly written.I know an HTC import ban was issued. The ITC can both recommend an import ban and issue a cease and desist order (preventing a found infringer from selling already imported devices in its inventory). In HTC's case, the ITC issued the import ban, but did not issue a cease and desist order. So, HTC could sell product that was already in the Country. HTC did not have a FRAND defense.
So, the ITC does have options if it finds infringement. Regardless, it should have not found infringement based on the FRAND defense. Samsung, like Motorola, is asking for 2.5 percent of the retail cost of a product. That is way higher then the industry standard, as determined by the judge setting the FRAND rate for Microsoft. Motorola was asking for 4 billion a year from Microsoft. The judge award 1.8 million a year. Huge difference.
That's not at all what the Motorola case judge determined. Go back and read the rationale behind his finding for yourself. He did not find that a 2%+ royalty demand was in and of itself "higher than the industry standard" nor unfair.for that matter. He applied his reasoning to one particular standard and specific to a certain number and set of patents under that standard which is why it won't establish any new legal precedent on an appropriate royalty percentage or basis for FRAND-pledged IP. At least that's what I find when researching the decision for myself.
As for your claim the ITC has a choice of punishments, a cease and desist is simply another form of injunction but applying to the sale of existing domestic inventory. So where's the choice besides an injunction on imports and/or an injunction on domestic sales?
EDIT:
BTW, it surprised me too that the ITC chose to enforce an injunction based on SEP's considering the pressure they were under not to.
That's the subsidized price you're quoting but in all you are not wrong.
Ah, GG, still posting limited portions of decisions to try and skew the "spirit" of what happened.
Motorola got a serious smackdown and ended up with a fraction of what they were asking, no matter whose "method" you use to calculate. Another quote from the decision by the judge:
"only constitutes a sliver of the overall technology incorporated"
Which shoots down Motorola's "one bullet can kill" theory. It's asinine for Motorola to think their small number of patents should get them more money than other patent pools with many times the number of SEP's related to the standard.
And it's not over for Motorola in this case. There's still a case coming up in August to see if Motorola failed to meet its "contractual obligations" when it made its offer to MS. Considering the abslutley HUGE difference between what Motorola asked and what they ended up with, I think this case will go badly for Motorola.
The inference by TBell was that the court's judgment in the Motorola case established the amount of a fair or "standard" royalty rate for FRAND-pledged IP, and that it would extend to other SEP holders as well. It did not do either of those things.
So how did my reply skew that? Oh, right. . . it didn't.:rolleyes:
EDIT: I guess I'm back off your ignore list then. That's good or you wouldn't know to challenge me on things I've posted.
Quote:
Originally Posted by EricTheHalfBee
They're assuming that the ban will start in exactly 60 days. Apple has already said they will appeal so I think the chance the ban actually comes into effect is slim. Should be easy to drag this out a couple more months and turn that "minimal" impact in "zero" impact.
Or Apple could turn this around. Have a fire sale and sell off old models at steep discounts to clear inventory. Makes their minimal loss even smaller and gives them some good will with customers (and AT&T).
That's the route I expect, which timetable runs in range (or beyond) of the new iPhone announcement and release which is likely to eliminate the 4 from the lineup in any case.