Friday, April 19, 2013

The Precipitous Fall of Apple Stock

Dean Baker notes with interest that Apples stock has had a precipitous decline since September of last year. While his article is well informed about the fact that Apple can't seem to find a place to invest its money, I think there is another factor that is at work against the value of Apple stock: patent aggression.

Apple has become an incredibly vexatious patent aggressor. The decline seems to have started around the time that Apple was able to fool a jury into thinking that it deserved a $1B damages award from Samsung for alleged patent infringements.

The litigation has highlighted the trivial nature of the patents in question. For example, there is one design patent for a tablet in the shape of a rectangle with rounded corners. Yes, Apple is fighting over that. Apple has also seen the damages award cut by more than $400 million by the judge due to errors made by the jury. The verdict might not have gone so far in favor of Apple had it not been for a jury foreman who wasn't completely forthcoming about his history with Samsung prior to selection for jury duty. A new damages trial is likely.

The most interesting aspect of the first suit against Samsung (yes, there is more than one) is Apple's insistence that Samsung be ordered to pay damages on patents that already have preliminary USPTO rulings of invalidity. Apple is hoping that they can get damages for infringements on patents that are very like to see final rulings of invalidity. How fair is that?

Apple is engaged in a desperate nuclear war against Samsung, one of the largest phone makers in the world, and Android, which now comprises more than 75% of the mobile phone market. I think that astute shareholders are aware of Apple's litigation tactics and can see that Apple can't compete against foreign companies without US government assistance.

When Apple can let go of their patents and get interested in creating new products again, I surmise that investors will take interest. Until then, Apple is likely to follow the prophecy of Steve Jobs who vowed to destroy Android with every dollar at his disposal, without actually destroying Android.
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