Apple Inc (
recently settled its "iPad" trademark lawsuit in China. According
to Bloomberg, Apple paid $60.0 million to Shenzhen-based Proview
Technology; a division of now-bankrupt Proview International
Holdings. Higher people's court of Guangdong province acted as the
mediator in the settlement process.
The legal dispute encircled the "iPad" trademark whose worldwide
rights in 10 different countries (including China) were bought by
Apple several years ago from Proview's Taiwan unit. However,
Proview claimed that the sale did not cover the trademark used in
China, and its Shenzhen unit owns the iPad name in China.
Apple sued Proview's Shenzhen unit in 2010, but lost the case in
December last year. Proview successfully argued that it holds the
trademark in China and several other countries since 2001, and had
intended to use it for a web-capable hand-held device. However, the
project was eventually scrapped.
Hong Kong-based Proview filed another lawsuit against Apple in
Shanghai. The company also asked Chinese authorities in more than
20 Chinese cities to block the sale of Apple's iPad following the
ruling. In May this year, Proview tried to sue Apple in the United
States, but the case was immediately dismissed by the court.
Although the settlement amount is much less than Proview's
initial demand (the company had asked for as much as $1.57
billion), we believe that it will be of substantial help for the
already bankrupt company. We believe that the meagre settlement
amount reflects Apple's superior bargaining power and strong brand
value in China.
We believe that the settlement will help overcome a major
obstacle in Apple's growth path in China. China is one of the
fastest growing markets for Apple and a lingering trade dispute,
which prevented it from selling its iconic tablet, could have hurt
its competitive edge against Lenovo, Samsung and
Currently, iPad dominates China's tablet market with more than
70% market share. According to market research firm IDC, from the
date of its launch, Apple has shipped more than 6 million iPads in
China. Apple's another core product iPhone continues to generate
strong sales in China.
In the second quarter of 2012, Apple reported that iPhone sales
in Greater China tripled to $7.9 billion (faster growth than any
other region), based on the iPhone 4S release and the addition of
China Telecom (CHA)
as an iPhone carrier. Apple also stated that it has sold five times
as many iPhones in China as it did in the year-ago quarter.
We continue to believe that Apple's ability to innovate and grow
in China, where the market is more cost-sensitive, will determine
the company's fortunes over the long term. We expect Apple to
continue to forge partnerships with local telecom providers in
order to increase its penetration in the Asia-Pacific region going
forward. The partnerships will help it to provide devices
compatible with local 3G and 4G networks, thereby boosting its
subscriber base going forward.
We maintain our Outperform recommendation over the long term
(6-12 months). Currently, Apple has a Zacks #3 Rank, which implies
a Hold rating in the near term.
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