“It’s been a lousy few weeks for Apple. Between an ongoing investigation into its stock options practices and heightened competition in the high-growth digital entertainment market, there’s hasn’t been much for investors to cheer. Till now, that is,” Tim Beyers reports for The Motely Fool.
“On Wednesday, Apple agreed to pay $100 million to settle its legal tussle with Creative Technology over the iPod,” Beyers reports. “Financial details of the agreement weren’t immediately clear, although the Wall Street Journal reported that Apple would record the Creative license as an asset on its balance sheet and then amortize the cost over many years. As a result, the Mac maker expects no material impact to earnings.”
Beyers reports, “But there’s more to this deal than a cheap out from potentially expensive litigation. Creative will join Apple’s ‘Made for iPod’ program by certifying earphones, headphones, and other future products for the iconic music player. And that should lead to revenue for Apple. As late as October, News.com was reporting that Apple demands a royalty equal to 10% of the wholesale price of ‘Made for iPod’ products.”
“What’s more, Apple is allowed to recoup costs if others agree to license Creative’s patent. Will there be other deals? It’s a good bet Creative will try to secure some,” Beyers reports. “Plus, there are plenty of targets, with the biggest and most obvious being Microsoft. Its planned Zune player is expected out before the holiday season. Creative could get ahold of a beta version of the device and, if there’s evidence of a patent violation, file suit and petition for an injunction.”
Beyers reports, “Apple would love nothing better, of course. But even if Mr. Softy and other i-wannabes avoid the courts, they’re unlikely to avoid the extra time and expense of working around Creative’s patent. That, too, is a win for the Mac maker. Well done, Steve.”
Full article here.
As is usually the case, Beyers gets it.
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Apple and Creative settle – the bigger picture – August 24, 2006
Creative Tech shares surge in early trading, Apple also up – August 24, 2006
Creative Tech’s investors cheer iPod decision but company’s woes far from over – August 24, 2006
Analyst: Apple’s relatively small settlement with Creative removes threat hanging over iPod – August 23, 2006
Apple & Creative settle: Apple pays $100M for ‘Zen’ patent, Creative plans iPod accessories – August 23, 2006