Apple Inc Suppresses Android with Lawsuit

Apple (NASDAQ:AAPL) is suing Android over patent rights and is holding out for a major settlement according to Deutsche Bank’s Chris Whitmore. Apple has been involved in numerous other lawsuits against companies such as Samsung, HTC and Motorola (NYSE:MMI). Though suits are with individual companies, they are targeting Android for alleged patent infringements over multitouch and other technologies. Apple’s legal plan has also been created to suppress the development of Android.

Android smartphone vendors shipped 240 million devices in 2011. An additional 390 million are predicted to ship this year, and 465 million in 2013. Apple shipped 84 million iPhones last year.  Another 112 million are forecasted to ship this year and 130 million in 2013.

By waiting for a big settlement, Apple could impair Android in three main ways, according to Whitmore.  “First, it could convince additional handset manufacturers contemplating use of the Android OS to look elsewhere for OS support” the analyst said. “In addition, it could slow developer investment in the Android platform. And finally, it makes Android more costly for vendors to support (litigation expense, etc).”

Whitmore also said there are four possible outcomes to the suit. The case might be settled with a per-unit license fee given to Apple, which Whitmore believes would be about $10. Apple could handicap Android’s feature set and/or distribution channels and takes 25% of the platform’s future market share adding up to a value of about $260. It is also possible the case has no winner or Apple could lose and file a counterclaim.

“As a result, we suspect Apple is unlikely to settle cheaply,” said Whitmore. “Although Apple has not expressed a desire to settle, most believe a settlement could occur resulting in [a] $10-per-unit software licensing fee. Beyond the monetary benefit to Apple, a settlement would make Android-based handsets incrementally more expensive and less competitive due to the higher OS cost and would likely support incremental iOS share gains vs. Android.” Nevertheless, with the possible value that Apple could gain it is doubtful they will settle soon, says Whitmore, who expects the legal battle to keep going well into 2013, making for a “long, drawn out process.”

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