Technology stocks looked to shake off the previous session’s losses in early trading Thursday, with Creative Technology Ltd. (CREAF : 7.52, +1.51, +25.1% ) leading the advance. Creative shares surged $1.47, or more than 24%, to $7.48 after the maker of digital-media players reached a $100 million settlement in a patent dispute with Apple Computer Inc. (AAPL : 67.76, +0.45, +0.7% ) . Apple shares rose 31 cents to $67.66,” Rex Crum reports for MarketWatch.
Full article here.
Michael Gartenberg writes for Jupiter Research, “So you’ve seen the news about Creative and Apple. What does it mean? Net for Creative, validation for their patents and 100 million from Cupertino (which may not end up costing Apple 100 million based on who else ends up paying Creative). Net for Apple, settling a suit that might have cost them more to fight and they take a win with Creative joining the “Made for iPod” licensing program. Getting creative as a licensee for iPod accessories certainly underscores Apple’s position in the market as the dominant player. That might have been worth 100 million all by itself.”
MacDailyNews Take: We await Creative’s first batch of “Made for iPod” accessories. Anyone care to predict the date of end of Creative’s MP3 player lines?
Related articles:
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
“Anyone care to predict the date of end of Creative’s MP3 player lines?”
As soon as the current inventory is depleted.
Summer 2008?
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Holy crap, I just went to Creative’s website. They have like 500 different models of MP3 players. WTF? Maybe if they would’ve kept the product line-up simple they could have half a prayer of succeeding.
Yeah, as soon as the current inventory is depleted. They didn’t announce it yesterday, but you can rest assured that absolutely was part of their settlement agreement.
Creative will stop making mp3 players and produce iPod accessories. So in essence, Apple spent only $100 million and bought Creative out of the market. It’s a good move for both companies and their stocks should both be up this morning.
So what does the F at the end of CREAF stand for?
This is a win all around as the article suggests:
$0.85/share for CREAF shareholds
CREAF hedges their bests against continued iPod dominance and Zune market pressure by joining Made for iPod (and puts CREAF in a better position to earn fat margins on accessories rather than undercut the iPod maker in a market it is loosing to).
AAPL gets to focus on better things and earns a commision on CREAF’s Made for iPod accessories.
So basically, for $100M, Apple purchased a share of Creative’s patent portfolio (with a share of licensing proceeds), removed a competitor from the market, gained a good accessory maker, and got rid of the litigation around its neck.
Nice move. When Steve wants to negotiate, it’s best to get out of his way.
MDN: got. Indeed
Anyone care to predict the date of end of MDN criticism of Creative?
“We’ll make them an offer they can’t refuse…”
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$100M is a balance sheet adjustment. I wonder what it has lost trying to compete with Apple?
Is this bad news for Griffin Technology ?
Hey. I think that there is a market for mp3 players other than Apple iPods.
Like Dell does, there is a whole market for really cheap small mp3 players of different shapes and sizes. I bough one that looked just like a Creative player by VR3 for $20. 128 meg.
It is neat. It carries 1-2 CDs worth of music and if I lose it, who cares. If I drop it in the water, who cares.
My point is that Apple focuses on the better quality units. Creative can still make cheaper units.
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Secretly, this has much to do with Tower Records recent bankruptcy filing. Since Creative now holds the patent on organizing music by ‘Artist, album, song’ hierarchical format, all music stores will need to respond by shuffling their CDs in a random order. Or sort everything by Album, then Artist.
Wouldn’t that be a crazy world? Of course I’m kidding- the patent covers electronic interfaces only.
Considering that Creative gives Apple some of the money as it squeezes the other players for licensing fee, the $100 million sounds very much like a loan to me.
Basically, Creative promises not to give Apple not so much as a dirty look, while it gets a lifeline to go after Sandisk and Zune for big payments.
You can bet that Creative saw the writing on the wall when Zune was all but announced by Microsoft. They might have thought they had a chance to compete against iPod (however silly) and Sandisk, but not against iPod, Sandisk, AND Zune.
The deal allows them to make a lot of money from patent licensing while giving them a face-saving way to exit the whole non-profitable music player manufacturing business while magically turning into a maker of highly profitable iPod accessories.