Best of the Week
Most Popular
1.Is the Stocks Bull Market Over? Dow Trend Forecast into End January 2015 - Nadeem_Walayat
2.Gold and Silver Stocks Apocalypse Now, Bear Market Review - Rambus_Chartology
3.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
4.Ebola Terror Threat Suicide Bio-Weapons Threatens Multiple 9/11's, Global Plague - Nadeem_Walayat
5.Second-Richest Man Says Mortgages Now a "No Brainer" - Dr. Steve Sjuggerud
6.Gold And Silver Still No End In Sight - Michael_Noonan
7.NHS Baldrick Plan to Spread Ebola Across UK - Sheffield, Newcastle, Liverpool, London Hospitals - Nadeem_Walayat
8.The Gold Bug is Set to Bite Back - EWI
9.How Alibaba Could Capitalize on the EBay-PayPal Split - Frank_Holmes
10.The Consequences of the Economic Peace - John_Mauldin
Last 5 days
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14
Bullish Silver Stealth Buying - 24th Oct 14
Blood in the Streets to Create the Gold Stocks Investor Opportunity of the Decade - 24th Oct 14
Swiss ‘Yes’ and ‘No’ Gold Initiative Campaigns Compete at Launches in Bern - 24th Oct 14
War And The Law Of Unintended Consequences - 24th Oct 14
Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - 24th Oct 14
Saudi Move to Cut Oil Prices Is Now Russia's Biggest Economic Threat - 24th Oct 14
US Stock Market Top Is Now In Sight - 24th Oct 14
New Profit Points in the Shifting Balance of Power, Welcome to Saudi America - 24th Oct 14
QE Failure & Folly Of Paper Mache, Treasury Bond Integrated Lifeline Patches - 24th Oct 14
U.S. Economy Faltering Momentum, Debt and Asset Bubbles - 23rd Oct 14
Annuities - Afraid Your Money Will Vanish before You Do? - 23rd Oct 14
What Debt Deleveraging? - 23rd Oct 14
How to Profit from Massive Spin-Offs with Just One Play - 23rd Oct 14
Evaluating Ebola as a Biological Weapon - 23rd Oct 14
Euro, USD, Gold and Stocks According to Chartology - 23rd Oct 14
Why You Should Always Be Invested in the Stock Market (Even Now) - 23rd Oct 14
Five U.S. Housing Market Warning Signs Point to Real Estate Market Downturn - 23rd Oct 14
The Better Short: Gold or Silver? - 23rd Oct 14
Focus on Graphite Companies with Green Energy and Technology Strategies - 22nd Oct 14
Crude Oil Price Hitting Bottom - 22nd Oct 14
Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - 22nd Oct 14
Gold Or Crushing Paper Debt Stocks Crash? - 22nd Oct 14
India Gold Demand Surges 450% and Bank of Russia Demand At 15 Year High - 22nd Oct 14
Bitcoin Stock Exchange Could Be "More Valuable than Alibaba" - 22nd Oct 14
Currency War - How to Profit from a Stronger U.S. Dollar - 22nd Oct 14
Banks Hold Treasuries and Make Loans- 22nd Oct 14
Gold and Silver Timing is Everything - 22nd Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VII) - 22nd Oct 14
Follow the Baby Boom to Biotech Stock Profits - 22nd Oct 14
Copper, Nickel and Zinc Won't Be Cheap for Long - 22nd Oct 14
How Will We Know That the Gold & Silver Price Bottom Is In? - 21st Oct 14
Is Gold as Dead as Florida Hurricanes? - 21st Oct 14
First Swiss Gold Poll Shows Pro-Gold Side In Lead At 45% - 21st Oct 14
The Similarities Between Germany and China - 21st Oct 14
The REAL Reason Why the Stock Market Turned Down - 21st Oct 14
Petrobras is a 'Scheme, Not a Stock' - 21st Oct 14
Stocks Bear Market Indicator Is Off the Mark - 20th Oct 14
Stock Market Ideal Turning Point is at Hand - 20th Oct 14
Investors Quit Complaining, The Environment is Perfect Right Now - 20th Oct 14
Ebola Armageddon Could Trigger a Rebirth in Gold and Silver Prices - 20th Oct 14
Gold vs Euro Risk Due To Possible Return of Italian Lira - Drachmas, Escudos, Pesetas and Punts? - 20th Oct 14
Stocks Rebounded Following Recent Sell-Off, But Will It Last? - 20th Oct 14
U.S. Responsible for West Africa Ebola Outbreak Says Liberian Scientist - 20th Oct 14
Stock Market Intermediate B Wave has Started - 20th Oct 14
Gold Stocks Analysis – FNV, CG, NCM, SBM - 19th Oct 14
Stock Market Primary IV Wave Counter Trend Rally - 19th Oct 14
Gold And Silver - Financial World: House Of Cards Built On Sand - 18th Oct 14
Anatomy of a Stock Market Sell-Off - 18th Oct 14
Why OPEC Has Declared an Oil War on Russia - 18th Oct 14
Gold and Silver Extreme Shorting Peaks - 18th Oct 14
Bitcoin Price Fall to $350? - 18th Oct 14
Tesco Supermarket Crisis Worse To Come as Customers Vanish! - 18th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Stocks Epic Bear Market

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

© 2005-2014 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

Free Report - Financial Markets 2014