Best of the Week
Most Popular
1.UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - Nadeem_Walayat
2.Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - James_Quinn
3.UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - Nadeem_Walayat
4.Billionaire Investors Backing A Marijuana Boom In 2017 - OilPrice_Com
5.Emerging Markets & Basic Materials Stocks Breaking Out Together - Rambus_Chartology
6.Global Currency Reserve At Risk - Jim_Willie_CB
7.Gold and Silver: Your Stomach Is Probably Wrenching Right Now - The_Gold_Report
8.Warning: The Fed Is Preparing to Crash the Financial System Again - Graham_Summers
9.Basic Materials and Commodities Analysis and Trend Forecasts - Rambus_Chartology
10.Discover Why A Major American Revolution Is Brewing - Harry_Dent
Last 7 days
You Are Being Lied To About “Low” Gold Demand - 19th Aug 17
This is Why Cocoa's Crash Was a Perfect Setup - 19th Aug 17
Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High - 19th Aug 17
North Korea Is Far From Being Irrational… It Has A Plan - 18th Aug 17
US Civil War - FUNCTIONAL ILLITERATES TRYING TO ERASE HISTORY - 18th Aug 17
Bitcoin Hits New All-Time High Over $4,400 As It Catches Paypal In Total Market Cap - 17th Aug 17
3 Psychological Ingredients behind Great Web Content - 17th Aug 17
The War on Cash - Rogoff, Orwell and Kafka - 17th Aug 17
The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - 16th Aug 17
Stocks, Bonds, Interest Rates, and Serbia, Camp Kotok 2017 - 16th Aug 17
U.S. Stock Market: Sunrise ... Sunset - 16th Aug 17
The Next Tech Crash Could Delay Your Retirement by a Decade - 15th Aug 17
Gold and Silver Precious Metals Nearing Breakout - 15th Aug 17
North Korea Showdown: Pivotal Market Turning Point - 15th Aug 17
Tech Stocks DOT COM Bubble Do-Over? - 14th Aug 17
Deep State Conspiracy or Chaos - 14th Aug 17
From the Trans-Atlantic Axis and the Trans-Asian Axis - 14th Aug 17
Stock Market Intermediate Correction Underway - 14th Aug 17
The Islamic State Jihadi Pivot to Asia - 13th Aug 17
Potential Pivots Upcoming for Stocks and Gold - 13th Aug 17
North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - 12th Aug 17
Gold Stocks Coiled Spring - 12th Aug 17
Neil Howe: The Amazon-Walmart Rivalry Will Determine the Future of Retail - 12th Aug 17
How to Alton Towers Half Price Discount Entry 2017 and 2018, Any Time, No Pre-Booking! - 12th Aug 17
Top 3 Technical Trading Tools Part 2: Relative Strength Index (RSI) - 11th Aug 17
What Makes Women Better Investors - 11th Aug 17
Crude Oil Price Precious Metals Link in August - 11th Aug 17
Influencer Marketing Predictions All Businesses Should Take Into Account - 11th Aug 17
Really Bad Ideas - Government Debt Isn’t Actually Debt - 10th Aug 17
Gold Sees Safe Haven Gains On Trump “Fire and Fury” Threat - 9th Aug 17
Why Is The Stock Market Not Trading On Fundamentals Lately? - 9th Aug 17
USD/CAD - Can We Trust This Breakout? - 9th Aug 17
New Monthly Rebate to Help Reduce Your Trading Costs - 9th Aug 17
Stock Market Divergences Are Now Appearing! - 9th Aug 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

The Secret to Apple's Patent Wars

Companies / Tech Stocks Jun 04, 2012 - 08:33 AM GMT

By: Money_Morning

Companies

Best Financial Markets Analysis ArticleDavid Zeiler writes: In a single stroke, Apple Inc. (Nasdaq: AAPL) could gain the upper hand in its seemingly endless patent wars with Samsung Electronics (PINK: SSNLF) and others.

Or the tech giant could blow its chance and wind up paying billions of dollars in licensing fees.


The outcome hinges on how Apple deals with a little-known company based in Sweden.

This micro-cap just happened to file a patent for the "swipe-to-unlock" touchscreen gesture in 2002 - three years before Apple filed its patent.

The company, Neonode (Nasdaq: NEON), received its U.S. patent in January.

Neonode holds a number of touchscreen-related patents that could become decisive in several of Apple's mobile computing patent cases.

Already the "swipe-to-unlock" patent helped Samsung defeat Apple in a recent patent case in the Netherlands. Samsung said the patent, as well as a phone Neonode released in 2005, represented "prior art."

"Apple just shot itself in the foot and all the blood is going to go to NEON," Jim Altucher, managing director of Formula Capital and well-known investor, wrote in a blog post Tuesday evening.

Insiders told The Wall Street Journal in April that Samsung plans to use the Neonode patent in a similar but much more crucial case in San Jose, CA, scheduled for a July trial.

And Altucher added a scarier prospect for Apple.

If Neonode does indeed hold the patent trump card for "swipe-to-unlock," it could gun for a cut of Apple's profits by filing its own patent case.

Should Apple be forced to fork over licensing fees to Neonode, it could cost the Cupertino, CA, company billions of dollars a year.

So far all this sounds like a big mess for AAPL and a big opportunity for its patent war rivals. Not just Samsung, but also for such titans as Google Inc. (Nasdaq: GOOG) and Microsoft Corp. (Nasdaq: MSFT).

Yet if Apple acts boldly, it could gain a crucial advantage on its mobile computing competitors.

How Apple Can Win the Patent Wars
What could Apple do? Well, it could consider a licensing agreement with Neonode.

Neonode's head of IP, Yossi Shain, told TechCrunch in February it was seeking licensing deals for the "swipe-to-unlock" patent and planned to contact Apple.

But the truth is such a deal would be of limited benefit to Apple. Neonode's business model is to make non-exclusive licensing agreements for its technology, so Android device makers would have equal access to the same patents.

Without exclusive control of those key patents, many of Apple's patent cases would crumble. That's what happened in the Netherlands.

So Apple needs to buy Neonode, and the sooner the better. Not only would that avoid the need to pay Neonode, it would strengthen Apple's hand in the patent wars.

Apple can easily afford NEON, even at a steep premium. Neonode stock currently trades at about $6 with a market cap just under $200 million.

And because Neonode is based outside the U.S., Apple could use some of its $74 billion in foreign-based cash to pay for it. With that kind of money, Apple could pay 10 times Neonode's valuation - about $2 billion - and hardly miss it.

In any event, buying NEON would almost certainly be cheaper than paying it licensing fees.

But most importantly, Apple needs to buy Neonode to prevent its rivals from snatching those key patents. Microsoft, Google and Samsung - each well-heeled in its own right -- would love to have them.

"One of these companies is going to have to buy NEON to get a hold of the original patents," Altucher wrote. "Not only did NEON patent the swipe-to-unlock but they patented many of the touch-sense technologies we use on tablet devices."

What the Neonode Patents Mean For Investors
For investors, the Neonode situation raises a caution flag on Apple. Should Google or Samsung snap up Neonode, the balance of power in the patent wars will shift away from Apple in a major way.

It's hard to predict just how much harm that would do to Apple's business. But the company uses those touchscreen patents in its iPad, iPhone and iPod Touch products, which together generate more than three-fourths of Apple's revenue.

Far more interesting is what this development means for tiny Neonode.

In his blog post, Altucher contends that Apple's dire position relative to the Neonode patents is "more than enough to drive NEON to $30."

Not surprisingly, Altucher's post pushed the stock up 28% in Wednesday trading.

But an acquisition is not all NEON has going for it. Neonode already has e-reader patent licensing deals with such companies as Amazon.com (Nasdaq: AMZN), Sony Corp. (NYSE: SNE) and Barnes & Noble Inc. (NYSE: BKS).

And in April Neonode announced 17 design wins where the company helped customers integrate its technology with their products. Altucher suspects some of these undisclosed products may include household appliances and auto touch panels.

Earnings for the March quarter were a mixed bag. Revenue rose 100%, while the cost of that revenue rose 61% and Neonode posted a loss of 5 cents a share.

But guidance was positive, with the company forecasting revenue of $18 million-$20 million. Revenue for the March quarter was $1.2 million.

While Neonode's prospects look tempting, particularly if it can execute, investors should note that its small market cap and low float do make it more risky and volatile.

In addition, NEON only just started trading on the NASDAQ May 1; before that it was an OTC stock. It's also worth noting that Neonode's phone-making arm declared bankruptcy in 2008.

Nevertheless, Altucher, who owns Neonode stock, accentuated the positive in his piece.

"A competitive technology can always be developed, but NEON has the significant advantage of having patents, clients in every sector, and having been through the multi-year cycles to get these design wins," he wrote.

Source :http://moneymorning.com/2012/06/04/apples-nasdaq-aapl-patent-wars-this-little-known-swedish-company-is-the-key/

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife