Android litigation seen adding 'significant value' for Apple shareholders

Patent infringement litigation between Apple and Android-based handset makers is viewed as a positive for AAPL shareholders, who could benefit from the company's iPhone patent portfolio with licensing deals or a potential ban on Android devices.

Analyst Chris Whitmore with Deutsche Bank issued a note to investors on Monday offering his take on continued lawsuits between Apple and Android handset makers like Samsung, HTC and Motorola. He believes that the ultimate outcome of the litigation will add "significant value" for AAPL shareholders.

Whitmore sees two potential outcomes of the ongoing litigation, both of which are favorable to Apple. Either iPhone maker obtains a licensing fee for the sale of each Android device, or Apple could secure bans on some devices and take 25 percent market share from Android.

"Under the first scenario, we believe a $10 per (software) licensing deal would accrue roughly $35 per share in value to Apple stock price," he said. "Under the second scenario, we estimate the incremental value to Apple shareholders would be 7-8 (times) higher."

Based on Apple's current stock price, Whitmore believes investors will benefit from a "free call option on a potentially very lucrative income from IP litigation." He considers it a "high probability" that Apple will monetize that value with a licensing deal which is not currently priced into the company's market valuation.

"The upside potential associated with an outright win is so large we don't expect Apple to settle anytime soon — particularly not for the $5-10 per unit number that has been speculated in the press," Whitmore said. He believes the litigation will continue well into 2013 in a "long, drawn out process."

While Apple has opted to continue its legal battles against Android, Microsoft has taken a different approach in reaching licensing deals with Android-based handset makers. It's been estimated that Microsoft receives $5 for the sale of every Android smartphone sold by HTC, while Microsoft also receives royalties from Samsung's Android smartphones.

But a potential licensing agreement obtained by Apple could be much more lucrative. One analysis detailed last month claimed that Apple could collect up to $10 in royalties for every Android device sold.

Similarly, Whitmore believes that Apple's more than 200 patents and patents pending related to multi-touch technology are "largely undervalued" on Wall Street. He also sees Apple obtaining $10 per Android handset if it wins in litigation, adding $35 incremental to the company's share price.

But licensing deals would leave a lot of potential money on the table. If Apple were to win outright and courts were to ban Android handsets or severely limit the features of Android, he sees "enormous" financial benefits for Apple, potentially adding $261 to the company's stock price.

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44 Comments

lkrupp

said about 12 years ago

Okay, so now we have one analyst saying the patent thing could hurt shareholders and another saying it could help shareholders.

Apparently, as it turns out, all analysts are biased, all journalists are biased, all facts can be spun any way you want to to produce the results you desire. I had suspected this for years but was too gullible to accept it. Silly me.

umumum

said about 12 years ago

Quote:

Originally Posted by AppleInsider

<blah blah blah ...>
Whitmore said. He believes the litigation will continue well into 2013 in a "long, drawn out process."
<...blah blah blah>

another two years of patent nonsense, nooooooooooooooooooooooooooooooooooooooooooooooooo ooooooooooooooooooooooooooo

blastdoor

said about 12 years ago

I tried for a while to follow all this patent stuff using that blog by Florian Muller (sp?), who generally seems better informed and more sensible than most of the other people who comment on patent issues. But it seems to me that even he really doesn't have any idea how this is going to turn out.

I've come to the conclusion that if anybody truly knows with any confidence what's going to happen with these patent suits, they are not talking in public about it. Corollary: everyone who talks in public about this stuff has no idea what they're talking about.

The only little thought I have that makes me think Apple has more to gain than to lose is that they wouldn't be pursuing such an aggressive strategy otherwise. When Jobs was in charge, we could have imagined that this was all a personal thing without regard to probabilities of winning. But I suspect Cook is a guy who is going to do things by the numbers. If Apple starts looking for out of court settlements, we can infer that Cook has decided the chances don't look good for big wins. But if Apple sticks with their aggressive strategy, I'll conclude that Cook (+ apple lawyers) really think they can win, and they are probably the people in the best position to make that perdition (doesn't mean they'll be right, of course).

fecklesstechguy

said about 12 years ago

Quote:

Originally Posted by lkrupp

Like any other source, you need to look at the whole picture. Not all sources (and frankly precious few anymore) will report the entire picture. You don't gain pages hits by being truthful, unbiased and objective - the unfortunate reality of blogging, internet ubquity, and lowering the bar on "journalism". Moreover if this analyst has his clients long on APPL, then he is going to (within the actual capacity of the stock and what if any few professional ethical standards are required) reinforce any net advantages to corporate action, and downplay any negatives. In reality (which in and of itself doesn't pull in many page hits), the end result of the litigation scene will be played out over the next 5-7 years, which is longer than most people ever care to be interested in something.

The litigation approach, is simply now a part of corporate strategy in negotiating licensing and IP ownership/usage. Is it right, on the face of it, perhaps not. But the days of captains of industry sitting down and meeting face to face to negotiate resource sharing is long past if they actually ever existed at all.

Meantimes it keeps page hits coming in on sites like this and gives those of us with interest something to argue about *grin*