Apple Beaten in Aussie Court - Analyst Blog

In an unprecedented turn of events, Apple Inc. ( AAPL ) suffered a rare defeat as the Australian Federal Court cleared the way for Samsung Electronics to sell its Galaxy 10.1 tablets in Australia.

However, Samsung has got to wait until the termination of the existing ban period, or, December 2, 2011, before its Galaxy tablets hit the stores. Besides, Apple has the option of appeal in a higher Court for re-imposing the ban, post the expiry of the stipulated ban period.

In October this year, an Australian court had ruled in favor of Apple and temporarily banned the sale of the latter's Galaxy 10.1 series of tablets in the country. The ruling was in relation to the patent infringement case in which Apple had sued Samsung over the design and look of its galaxy products. (For the related story please read: Apple Beats Samsung in Aussie Court )

Apple's defeat in Australia, though a smaller market compared to Europe and Asia, will likely boost Samsung's confidence to counter other design-related lawsuits in the U.S., Germany, Korea, Japan, the Netherlands, Britain and France.

Until now, Apple seemed to have enjoyed an advantageous position as it successfully defended its design-related patent lawsuits in several countries, where the rulings went against Samsung, banning its Galaxy Tabs and smartphones. However, this case appears to have exposed a chink in Apple's armor of design-related patent infringement lawsuits.

While the bans have given the iPads a head start in capturing consumer mindshare, the loss could prove to be a big one. The look and feel of the iPad is a competitive differentiator and with these differences receding, Samsung is going to find it easier to compete with Apple. Additionally, there is always the fear that other courts may rule along the same lines.

This is a positive for consumers however, as it should increase competition and encourage continued innovation in performance rather than looks.

Black Friday Sales & Apple's Trajectory

Apple sold about 15 iPads per hour at Apple Stores on Black Friday, a 68% increase from last year and management expects Apple to sell 13.5 million iPads and 5.2 million Macs in the quarter that ends on Dec. 31, according to an analyst at Piper Jaffray. (Piper Jaffray's estimates have been notoriously off in the past, so we need to take a wait-and-see approach).

Apple might have kicked-off its holiday season in the domestic market with a bang, but its smartphone and tablet markets are crowded with the likes of Research In Motion Ltd. ( RIMM ), Hewlett-Packard Co. ( HPQ ), Dell Inc. ( DELL ), Samsung, Cisco Systems Inc. ( CSCO ), Toshiba and Acer, which are gaining popularity in several international markets. Additionally, Inc. ( AMZN ) stepped into the intensely competitive tablet market with the launch of its first media tablet: "Kindle Fire".

Some analysts expect the lower-priced Kindle Fire to gain traction in the tablet market for the varied services and content offerings. Others believe that the company may not gain ground versus Apple just yet, although it could get other tablet makers to review their pricing. However, so far, Apple has managed to maintain its leadership position in the tablet market and enjoys a very strong position in the smartphone market as well.

Nonetheless, the impending lawsuits in different countries will remain an overhang on the stock going forward.

We also believe that Apple's ability to innovate and grow in developing nations, where the market is more cost-sensitive, will determine the company's fortunes in future.

We maintain our Neutral rating over the long term (6-12 months). Currently, Apple has a Zacks #2 Rank, which implies a 'Buy' rating in the near term.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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