Apple shares drop 3.8-percent; WSJ says iPod battery settlement could cost $100 million [UPDATED]

The Wall Street Journal is reporting that the Apple iPod battery settlement could cost the company as much as $100 million, if a judge approves the terms. Apple Computer (AAPL) shares fell 3.8% in pre-market trading.

Full article (paid subscription required) here.

“Tentatively settling a lawsuit that had tarnished the golden image of its iPod music players, Apple Computer Inc. has agreed to give $50 vouchers and extended warranties to customers who have had problems with the lifespan of their batteries,” Matthew Yi reports for The San Francisco Chronicle. “As many as 2 million people may be affected by poor battery life in some older iPods, which could translate to as much as $100 million worth of givebacks for Apple, Eric Gibbs, a San Francisco lawyer representing the consumers, said Thursday.”

“However, analysts said they believe the financial impact on Apple’s bottom line could be far less because a majority of iPod owners probably would not file claims. Also, scores of customers may not still have their older iPods because many routinely ditch their players for newer versions, said Gene Munster, an analyst at Piper Jaffray & Co.,” Yi reports.

Full article here.

21 Comments

  1. Apple is starting its slow death spiral.

    And Longhorn detractors, take heart that Microsoft is taking time to make sure they are not rushed in producing the software that will change our lives and history forever.

    ©

  2. it’s a $50 rebate program for ipod upgraders…small change for Apple. Also, if 2 million existing ipod owners were to buy ipods, those new ipods would be recorded as ipod unit sales, which would make Apple look like it is continuing to sell ipods like hotcakes.

    Apple will lose some cash, but the actual impact is negligible, and also has a plus side to it.

  3. The claim form specifically states that you must have had problems with your iPod’s battery. I’m sure that the majority of those 2 million have NOT had problems and therefore won’t be filing a claim. Myself being one of them….

  4. informed and RC: One may have not had battery problems yet (as in don´t use their iPod that often), but they may. And what exactly is defined as a battery problem???
    And who in the hell is going to check to see if one did or did not have a battery problem?

    You have an eligible ipod? – FILE A CLAIM!!!!

    Use your $50 coupon to upgrade to Tiger!
    RC – send me your sales receipt- I will file the claim and take the $50 to go buy some Apple stuff!

  5. ““Battery Failure” means that the capacity of an iPod’s battery to hold an electrical charge has dropped to four hours or less of continuous audio playback, with earbuds attached, with respect to the Third Generation iPod, or five hours or less of continuous audio playback, with earbuds attached, with respect to the First Generation iPod and the Second Generation iPod.”

    Hmmm…my iPod has that situation.

    Most people won´t file because a) they no longer have the sales receipt or other proof;
    b) they will never hear of this;
    c) the website about this fails most of the time.

  6. Or
    d) most iPod owners are PC owners and don´t want $50 to go buy Apple computer products….
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  7. I hadn’t actually read the fine print of the notice when I first posted. All the terms are defined here: http://www.appleipodsettlement.com/notice.html

    The bottom line is: time and effort are required on the part of anyone wishing to get their $25 check, or $50 credit, or free replacement battery. (scan receipt, make PDF, submit electronically – yeah, lotsa 16-year-olds are going to do that) Then its sit back and wait for the appeals period to end sometime around September.

    If 250,000 people do this, I would be amazed.

    The Wall Street Journal apparently likes to take the most extreme, worst-case, all-the-stars-are-crossed scenario and run with it. Or maybe they let one of the genetically-defective simians who write their editorials do the report.

  8. Okay smarty pants. I’ll bite. It is simply not true that one has to HAVE HAD actual battery problems to file a claim. One has only to CLAIM TO HAVE HAD such problems. I am not so naive to believe that all iPod owners are too honest to make a spurious claim.

    On the other hand, there’s no way this will cost Apple $100M. Rather, it will cost them:

    2M eligible class members
    x the percentage who file a claim, let’s generously guesstimate 40%
    x the percentage of those who receive a coupon who actually use it, let’s say 75%
    x $50 discount
    x 100% minus percent of profits from new purchases that wouldn’t otherwise be made, lets say 40%
    x 100% minus percent of potential future upgrade profits from new purchasers, let’s guess this comes out to 35%

    So I get
    2,000,000 x 0.4 x 0.8 x 50 x (1-0.4) x (1-0.35) = $6M.

    For the arithmetically impaired (hi MSFT defenders!), 6M < 100M.

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