Apple Bytes #6 – Samsung In Court and More…

This week: Samsung in the dock, and more speculation…

People have asked why I blog about Apple: last week on Monday, the company’s shares passed the US$664 mark, setting a new record as the most valuable publicly traded company in history. On Tuesday morning the trend continued: Apple’s stock rose close to 1 percent, trading at $671.30 per share, outstripping MicroSoft as the most valuable company in history in the same quarter as M/S reported their first ever loss (don’t worry – it was a one-off!). Bear in mind that there is still the iPhone 5, the mini-iPad this fall, and the prospect of finally cracking the one market that eludes them (China: +1Bn consumers and Apple rank 7th!). The Cupertino posse look set to be a “$1 Trillion Baby” within the next financial year. Like them or loathe them, they cast a big shadow whose effects you can’t escape, especially if you’re swimming against the tide. Even the delay in the on/off Apple HDTV doesn’t really threaten to put a dent in their advance…

And so the big news this week was that Samsung found themselves with a $1Bn bill for infringement of Apple patents (Apple were actually looking for $2.5Bn!). To be honest, there were three things against Samsung:

– the case took place in California (i.e. Apple’s home ground); previously in the UK, we sided with Samsung, and in South Korea (Samsung’s home) the judge ruled they were both as bad as each other.

– Samsung’s case rested on the belief that Apple were trying to defend patents on technology that should never have been granted (Doh! They’ve got a patent – what part of that didn’t they understand?) Challenge the patent by all means, but don’t clone someone’s product and then expect your defence to be that Apple just followed the laws of physics…

– Apple produced an internal Samsung document that compared 130+ features of the iPhone to the Galaxy prototype, which came to the conclusion that if Samsung wanted to compete, they needed to make their product “more like an iPhone!”

Samsung will of course appeal, and the fine may well be reduced (let’s not forget the symbiotic relationship between these two – Apple source a LOT of components from Samsung annually), but what it does do is put all the other clone makers out there on notice: if you pull the tiger’s tail, you can expect to get bitten. Most importantly, it sends a warning shot across Google’s bow that before they try taking Apple to court over infringement of any of the Motorola patents they now hold, they had better be sure of their facts. (They are probably doing a deep dive on their Nexus tablet right now to make sure there are significant differences between it and an iPad). Amazon may also find Apple’s watchful eye scrutinising the Kindle Fire now, which could delay them even further in releasing it outside of the US.

Other speculation: Apple are currently under the watchful eye of the US government over their planned purchase of Authentec, a US fingerprint chip technology firm. There are assertions that the executive board of Authentec did not do its due diligence by seeking other potential suitors before accepting Apple’s offer. I expect Apple to buy Texas-based Cirrus Logic next. Cirrus specialise in some of the best audio chips you can buy, and depending on who you speak to, are rumoured to ship 60%-75% of their output to Apple. Well, that % just went up, as last month Cirrus spun off their non-audio chips division into a company called Apex (owned by a private equity company). I’m betting that Apple suggested to Cirrus, “Jettison the stuff we don’t want, and we could buy you out.”  Apple’s motivation is very simple: they’ve got billions in the bank, and buying up leading technology that ensure their products out-perform everyone else’s is a smart strategy. And of course, every company they buy comes with their own set of legacy patents…

As I said, Samsung & Apple have a symbiotic relationship: Samsung is the 2nd largest chip maker in the world (behind Intel) because it ships so much to its biggest customer, Apple. What Samsung need to do is forget trying to copy Apple’s products and focus on software & connectivity. Apple want to control infotainment in your home & car – part of your lifestyle – but it is currently limited to phones, tablets, media players & PCs. Samsung needs to leverage the fact that they are already part of your lifestyle: phones, fridges, microwaves, washing machines, TVs, tablets & PCs… if they could just get all this stuff to talk to each other and then build up a catalogue of content, they could potentially wipe the floor with Apple!

But what do I know – I’m just a geek, right!?!

P.S. I just bought a new Apple TV box – arrived this morning… look out for a review in Apple Bytes #7

GS Reporter: SilverFox

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