Apple Wins Lawsuit against HTC - Analyst Blog

The U.S. International Trade Commission ( ITC ) ruled in favor of Apple Inc. ( AAPL ), relating to a patent infringement case against HTC, the Taiwanese handset maker. The ITC found HTC guilty of infringing on one of Apple's four patents and thus banned certain handsets of HTC in the country. Apple had originally accused HTC of infringing on 10 patents, but later dropped six of those charges. The ban will take effect from April 19, 2012.

The patent in question was related to a certain technology that allows users to dial a number embedded in a text message, an email, or other types of data, by clicking on them. This technology is being used by most smartphone makers and Apple's victory in the case would definitely alert others.

Though Apple was handed the victory, HTC confirmed that the aforementioned technology is just a small part of the user interface, which the company will remove from its smartphones.

This win should act as a morale booster for Apple in the larger battle between Apple's iOS and Google's ( GOOG ) Android. In the third quarter of 2011, the Android global market share had almost doubled from the year-ago quarter to 52.5%. Meanwhile, Apple's iOS managed a 15.0% share, which declined from the previous year (16.6% in 3Q10). Analysts predict the momentum for Android to continue with the launch of its Ice Cream Sandwich version.

On the other hand, according to Nielsen, Apple leads the market in the U.S., with 28.6% market share in the three-month period ending October, way ahead of HTC, with just over 20% share in the total smartphone market. Apple is expected to keep the leadership position in the smartphone market with its latest release of iPhone 4S.

This win is all the more important as Apple scored a win after its recent failure to successfully defend its patent related cases. Recently, Apple suffered a rare defeat as the Australian Federal Court cleared the way for Samsung Electronics to sell its Galaxy 10.1 tablets in Australia. Moreover, Apple suffered its second major setback in that very week, as the U.S. District Court in San Jose, California, denied Apple an injunction bid to ban Samsung's smartphones and tablets in the US. According to the ruling, the court granted Samsung the right to sell its products in the country until the case goes to trial next year.

The company is entangled with patent related lawsuits with several companies such as Samsung, and Microsoft Corp. ( MSFT ). Legal issues may be expected to act as a headwind going forward.

Nonetheless, Apple has been a leader in the technology space and has always wooed its investors with its innovative product line. We believe that Apple's ability to spur the popularity of its products in developing nations, where pricing is often an important consideration, will go a long way toward deciding the company's future growth. Apple's sizeable cash balance will no doubt come in handy.

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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