Financial analyst believes patent litigation could raise Apple’s share price by $35-$260

“Fortune’s Apple 2.0 blog reports on a note issued by Chris Whitmore analyst Chris Whitmore to clients today, listing four possible outcomes of the patent wars between Apple and the Android ecosystem, and their impact on Apple’s shareholder value,” Florian Mueller writes for FOSS Patents. Philip Elmer-DeWitt, the author of the article, says that the note mentions a neutral outcome (no winner) and one in which Apple comes out on the losing end as possibilities but actually focuses on two more favorable outcomes: ‘a settlement where Apple licenses its intellectual property for about $10 per Android device sold’ [or] ‘where Android’s feature set or ability to distribute is diminished.'”

Mueller writes, “The analyst apparently believes outcome 1 would raise Apple’s share price by approximately $35 (a terribly erroneous belief in my opinion, as I’ll explain further below), while outcome 2 (described as ‘considerably less likely’ in the article) would offer an ‘enormous’ payoff since Apple could capture, for example, ‘25% of the future anticipated Android market,’ in which case its share price could grow by roughly $260 per share.”

“If Apple had to settle for a mere $10-per-device royalty without any further effect on competitiveness that would result from restrictions on features and/or distribution, investors should give serious consideration (after a full analysis of all of the relevant issues and factors) to shortselling Apple’s stock. Why? Because this would open the floodgates to Apple going once again through what it experienced in the 1990s: commoditization,” Mueller writes. “$10 per device is nowhere near the royalty level that offsets the continuing erosion of Apple’s market share.”

Much more in the full article – recommended – here.

MacDailyNews Take: The only option is to go thermonuclear. We love the smell of fallout in the morning.

Related articles:
Apple vs. Android patent war: HTC forced to drop one feature, Motorola may have to drop another; more to come – December 23, 2011
Apple likely to win German ruling against Motorola in February – December 22, 2011
HTC testing new Android models due to infringing Apple iOS patent – December 21, 2011
U.S. ITC backs Apple in patent ruling against HTC that hits Google – December 19, 2011
Steve Jobs: ‘I’m going to destroy Android, because it’s a stolen product; I’m willing to go thermonuclear war on this’ – October 20, 2011


      1. I think the recent run up on Google’s share price may be due to the buyback of the shares by Google itself. Notice the daily volume of Google’s share is very small when compared with other companies’ shares. Furthermore Google’s shares is very expensive and who have the deep pockets to afford such high price? No sane investor would want to chase a share with a high price tag and get burnt in the process. Since the share has been jacked up too high, this create an opportunity for existing shareholders to cash in, and thus you see the share price take the proverbial dive. What goes up must come down. An unfocused Google is another reason why shareholders are getting a bout of jitters.

  1. While I can see Apple selling some access to patent issues, I do not see it letting anyone copy the main look of its iPhone iPad layout. Do the same things… fine. Copy our look and feel… bad.

    Just a thought,

    1. Unfortunately, that ship has already sailed. We occasionally purchase a weekend newspaper. I browsed a couple of the advertisements and saw a whole string of “smartphones” that looked very similar to the iPhone – most of those were Samsung devices, of course. Go back about four years (pre-iPhone) and there was nothing that looked like it, nor was there a truly competitive mobile OS.

      I am not convinced that Apple will have any lasting success with its lawsuits because its opponents are gaining consumer mindshare in the near term and will work around Apple’s IP roadblocks in the longer term. Meanwhile, these companies will be seeking to turn the IP tables on Apple wherever possible, and will band together, if necessary, to gain sufficient strength.

      A perfect example is the recent announcement of a Lenovo HDTV with voice control and Android app capability. This is very likely a rapid response to the rumor that Apple is pursuing a similar path with iOS. If true, it is no wonder that Apple values its privacy so highly. If not, it is a great example of a hypersensitive tech sector seeking opportunities to one-up Apple. That eagerness also represents a great opportunity for Apple to toss out some red herrings and waste its competitors resources and time when they bite on them.

  2. Oh, please. Don’t even some of you most diehard Apple zealots take this talk with a bag of salt. Analysts have become just plain nonsensical with this sort of high-share price reasoning. Apple will be lucky to hold what it has in terms of share price and all this nonsense about adding a couple of hundred dollars to the current share price is pure fantasy. Apple has little chance of winning any suits against Android that will make them that much money. It would be nice to see Android OS crippled but Apple would never resort to licensing those key patents away for money. Apple already has money but really needs to keep the iPhone OS from being copied. The only money shareholders will see is if Apple is able to sell more iPhones and Android platform sells less smartphones.

    I’d advise all you Apple bulls to stop counting the money before it reaches your hands and be more concerned about the money you already have in your pockets from falling out.

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