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Apple News 7-25-2012; The Earnings, The Litigation, And The Patently Obvious...

by on25 July 2012 2003 times
tim cook 0115

Yesterday Apple reported their earnings for Q3 2012, asked an Australian court for $2.5 Billion in damages, and were granted a patent for technology that has (again) been on the market for a few years. Although each of these could probably fill an entire article we decided to lump them into one today so we can get to some real news after we wrap things up here. So let’s kick things off with the Q3 earnings call which fell short of expectations almost across the board.

Yesterday Apple had one of the worst dips in iPhone sales that the company has ever seen dropping to 26 million iPhones shipped from a high of 35 Million last quarter. This is pretty significant and although Apple and many analysts tried to claim “unprecedented” anticipation for the iPhone 5 we just cannot see a 9 million unit (26%) drop in sales.  Even Wall Street, which anticipated a pause in sales for the iPhone 5, did not see that big of a drop. Instead what we think we are seeing here is that Apple is hitting a saturation point in their flagship phone product and also facing much stiffer competition from other phone makers (Samsung in particular).  

For the iPad sales were up based on the launch of the “New” iPad. Apple pushed a nice 17 Million of these products out the door which is about 3 Million more than Q2 2012. Unfortunately these numbers ate heavily into the already slim market share that Apple has with their Mac line of PCs. Cook and company announced that Apple sold twice as many iPads to Schools as they did Macs which is shift in the normal buying patterns for educational institutions especially K-12. It is probably due to the much lower cost per unit of the iPad over even the least expensive Mac.  Mac sales were up only 2% over last quarter coming in at 4 million units sold.

Overall earnings were $35 Billion in revenue, $8.8 Billion net profit which comes out to $9.32 per diluted share.  This fell short of many predictions of $10+ per share and over $9 Billion in profit. Apple stock took a plunge and dropped from around $600.92 at close to $570 in after-hours trading. At the time of this writing Apple’s stock is at $572.85. Apple may pick up with the launch of the iPhone 5, we know that analysts and many news sites are working overtime to build the hype for the new phone that when launched will have the same technology that other phones have had for about two years (including slimmer screens). However, the market is getting smarter and they are certainly fickle when it comes to new technology. Many buyers were disappointed with the iPhone 4s at launch because it did not bring much new to the table there is concern that the iPhone 5 will follow suit especially since it is just getting LTE and NFC. These features might be enough to get the faithful to move to the new iPhone, but we wonder how much impact it will have one people that do not own one. Some analysts like Piper Jaffray will try to convince you that Apple will take 33% of Android’s market share with 80 Million sales in the bag, but their methods and conclusions fall seriously short of the mark and they have traditionally very wrong in their predictions about Apple’s growth.

Moving on to Apple’s ongoing war to try and patent everything we come to their claims against Samsung in court over in Australia. Here they are being sued by Samsung for violation of a Samsung held patent. The patent in question has been considered FRAND and Apple feels they should only have to par .5 cents per unit to use the patent. Conversely they are asking for some rather hefty numbers for items that they claim patents on; Overscroll Bounce, Their List API, and of course their patent on the rectangle all of which total up to an Apple estimate of $2.5 Billion. Now in the US when Apple asked for injunctive relief they claimed they could not even begin to estimate the damages and lost profits that Apple had sustained from Samsung’s “slavish” copying. However when they are defending against a patent suit and looking at possible damages they were able to come up with a nice little sum stating they have lost $500 Million due to the Samsung’s products. Although this is not going to impact the decisions that Luck Koh made in the US, it certainly should be admissible and factor into the trial. It shows that Apple knows very well what the competition is costing them and that they perjured themselves when they claimed they could not. Last time I checked that was against the law, but we have seen Apple get away with worse than this so we are not surprised.  Apple is also working very hard to prove that Samsung willfully copied Apple as that has the potential to triple the asked for damages if they are successful. Apple has a couple of problems in the AU case. It seems that Samsung has found clear prior art for some of Apple’s claimed patents in the form of existing patents on the same technology.  Samsung may also be able to show that the design that Apple claims is obvious due to its extensive use in movies and TV before Apple began work on the iPad in 2004. They have had success in the UK and a few other courts with this, but sadly the common sense used in these courts do not often penetrate across the oceans.  
MotionCapture

While we have no issue with patenting real technology (if you invented it) we do have an issue when patents are made intentionally vague or do not represent anything new, but are filed with the intent to use in court to block competition and harm the market. This is what Apple does with the majority of their products and brings us to the last part of our article. Apple has been awarded another patent that is little more than theft of other people’s technology bundled together and worded in such a way that it looks “new” to the slavish drones in the US Patent and Trademark Office.
optishot

The patent in question is patent number 8,228,305 and is a combination of Sony’s, Nintendo’s and Microsoft’s existing motion technology (especially Sony and Microsoft), but it goes a little farther by including clothing that can be registered by different sensors. This is technology that has existed in movie making for years where an individual will wear motion sensors and move through a field that will register the points on their body for proper animation. The technology and techniques have been around since 1978 in some case. Steve Jobs would have been exposed to this at Disney and Pixar so we are betting he got the inspiration there and watched as other companies made it work with their consoles.  Even the Kevlar screen concept is not new, but has been in use in the military for a number of years for virtual training and in teaching proper golf strokes!  Still Apple has managed to get this patent and now we are sure that they will embark on a new campaign to lock out the competition with it.  We have said this before and will say it again; Apple’s patents need to be looked at from an Anti-Trust view along with the company in question. Unfortunately the US is loathe properly go after Apple for some reason. Even the DoJ’s investigation into real issues of price fixing of e-Books has come under fire despite email evidence and settlements by several companies that were originally involved in the suit.

Something has to give here as the list of companies that have been brought before the Anti-trust courts for less obvious anti-competitive behavior is getting pretty long.

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Last modified on 25 July 2012
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