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HTC's patent settlement with Apple could cost it £175m a year

BusinessNews
by Chloe Albanesius, 13 Nov 2012News
HTC's patent settlement with Apple could cost it £175m a year

Apple and HTC recently revealed that they settled their patent dispute and agreed to a 10-year licensing deal, but details about the agreement were not disclosed at the time.

An analyst has suggested, however, that Apple might be making $6-$8 (£3.50-£5) per phone on the arrangement, or up to $280 million (£175m) in annual revenue given the fact that there will likely be 30-35 million HTC Android devices shipped in 2013.

"This is apparently lower than the range that [Apple] initially proposed," Sterne Agee analyst Shaw Wu wrote in a Monday note to analysts. "But to put this in context, this compares to press reports indicating HTC pays [Microsoft] $5 (£3.15) per phone running Android."

"One could argue that [Microsoft] has much [fewer] patents and intellectual property than [Apple] in this space and so we think $6-$8 seems reasonable if not a relatively small price for HTC and others to pay to be able to sell a modern smartphone with touch screen," Wu wrote.

Given that Apple has approximately $121 billion (£76bn) in cash, another $180-280 million for Apple will "be immaterial to its financials," Wu said.

If anything, the deal could help Apple arrange future deals with its current patent foes - Motorola and Samsung.

"With both Samsung and Motorola (which is owned by [Google]), still under litigation with Apple, the big question is whether they are closer to a settlement?" Wu wrote.

"We think the answer is yes and the terms set with HTC could at least provide a blueprint. We think it is fair that [Apple] will get some licensing revenue for the intellectual property it has developed (in particular multi-touch gestures) in making the modern smartphone and tablet with touch screens. Prior to the iPhone and iPad, there were arguably no products that were close in functionality and appearance."

The patent war between Apple and HTC started in March 2010. At the time, Apple sued HTC for 20 instances of patent infringement, all dealing with various elements of the iPhone.

"We can sit by and watch competitors steal our patented inventions, or we can do something about it," Steve Jobs, then Apple's chief executive, said at the time. "We've decided to do something about it. We think competition is healthy, but competitors should create their own original technology, not steal ours."

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