Analyst: HTC Settlement Could Net Apple $280M a Year

| Apple Stock Watch

Apple and HTC reached a settlement in their ongoing patent infringement fight, and that deal includes a 10 year cross licensing deal. The two companies didn't reveal the settlement details, but Sterne Agee analyst Shaw Wu's sources have him estimating HTC could be paying Apple between US$6 and $8 per Android phone, which could get the iPhone and iPad maker up to $280 million a year.

HTC patent settlement could net Apple $280M a year"Financial terms were not disclosed but we believe Apple is likely getting a net licensing fee due to its much stronger patent portfolio and we think position as undisputed inventor of the modern smart phone with touchscreen," Mr. Wu said.

Mr. Wu based his licensing fee estimate on discussions with his industry sources, and is estimating HTC will ship between 30 million and 35 million Android-based smartphones in 2013.

Mr. Wu said HTC's licensing payment "is apparently lower than the range that Apple initially proposed."

He added, "But to put this in context, this compares to press reports indicating HTC pays MSFT $5 per phone running Android. One could argue that MSFT has much less patents and intellectual property than Apple in this space and so we think $6-$8 seems reasonable if not a relatively small price for HTC and others to pay to be able to sell a modern smart phone with touchscreen."

Apple and HTC announced their patent infringement settlement over the weekend after an extended legal fight that included an injunction blocking the sale of some HTC Android-based smartphones in the United States. The 10 year deal includes worldwide cross licensing of certain current and future patents, and will keep the companies from fighting in court.

The agreement also shows that Apple is willing to work with its competitors, which may put pressure on Samsung to finally agree to a deal -- something Apple says Samsung has been unwilling to do in their ongoing patent infringement fight.

"The big question is whether Samsung and Motorola will also reach settlement agreements," Mr. Wu said.

Mr. Wu is maintaining his "Buy" rating and $840 target price for Apple's stock. Apple is currently trading at $550.91, up 3.85 (0.70%).

Sign Up for the Newsletter

Join the TMO Express Daily Newsletter to get the latest Mac headlines in your e-mail every weekday.

Comments

daemon

“One could argue that MSFT has much less patents and intellectual property than Apple in this space”

And such a person would be wrong….

“Sterne Agee analyst Shaw Wu’s sources have him estimating HTC could be paying Apple between US$6 and $8 per Android phone,”

Oh my goodness that is so cheap! Only 1% of the sale price! I’m so flabbergasted!

Substance

It might only be 1% of the retail price (using the numbers stated in the article, that would be mean the phone would be between $600 to $800), but it’s much more of a chunk out of HTC’s profit on every device sold.  And considering how much attention MS’s cut of every Android headset gets in the tech press, it would be consistent to give Apple similar attention if they got a similar cut, let alone if they get more per handset.

You know the saying “it’s good money if you can get it”, and nothing beats getting paid for no effort.

daemon

“You know the saying “it’s good money if you can get it”, and nothing beats getting paid for no effort.”

Apple’s patents are worthless in your eyes?

Constable Odo

That’s a less then a hunk of spit in a bucket for Apple.  They probably spend that much on toilet paper in a year.  It might hurt HTC but it is worth absolutely nothing to Wall Street’s eyes for Apple.  They probably even consider it a loss on Apple’s part.  Heck, that $1 billion dollar win from Samsung didn’t help Apple at all.

ilikeimac

The agreement also shows that Apple is willing to work with its competitors

Does anyone know which Apple patents were involved in this suit, and which are being cross licensed? I can believe that Apple would “work with its competitors” to cross license technical patents, but their battle with Samsung is largely over design patents, and I suspect Apple will fight much harder to protect those, and won’t cross license them.

skipaq

This is good for Apple. HTC must think it is best for them to settle. While the cash means little to Apple’s bottom line; the settlement means much as the number of companies at odds has been reduced. It also sets a benchmark for future negotiations. If the cash was flowing from Apple to HTC those brushing this off as nothing would be crowing a different tune.

daemon

“If the cash was flowing from Apple to HTC those brushing this off as nothing would be crowing a different tune.”

Keep in mind, we don’t know that isn’t what is happening. We have no actual information about the details of the agreement beyond that it exists, includes cross licenses, and resolves their current litigation between each other.

skipaq

Yes. I realize we don’t know; but the point is still valid. Whichever way the cash is flowing will be jumped on as good for “?” that side. In some ways this is good for everyone. That was the main point that I started with.

As far as Samsung licensing design patents is concerned; we know that such has already been discussed between the two companies. It would be surprising if their differences are not eventually settled in the same way.

The results of these settlements will show up as financial reports are released and analyzed. Then we should have a better idea of the direction of cash flow.

Log-in to comment