Apple Inc (NASDAQ:AAPL) might be more of a flow-through for money in the new future of technology, as the licensing deal becomes ever more ubiquitous, right behind the patent-infringement lawsuit. Apple is competing directly with many companies in terms of market share when it comes to computers, smartphones and tablets – especially in the mobile devices – and although it runs its own ecosystem, it also has licensing deals with many of the “competitors” to the point that Apple Inc (AAPL) is actually trying to win the market while at the same time rooting for the competitors to do well themselves.
There are a couple of examples of these types of relationship in the tech world, which on the one hand seem to show a lack of innovation in the industry nowadays, and also the relative rarity of the true siloed ecosystem where a company only relies on itself to produce its devices. Apple Inc (NASDAQ:AAPL) had been known for years for its proprietary ecosystem, but it has been paying competitors like Samsung Electronics Co. Ltd. for components for several devices. And now, Samsung has leveraged its ability to be the only component supplier for some Apple Inc (AAPL) devices, reporting recently that it is raising its price for components by 20 percent, which is a surprise to Apple. However, as Apple could not find an adequate replacement supplier, it has agreed to the new cost.
On the other side of the coin, Apple Inc (NASDAQ:AAPL) may end up making a windfall from competitors who are trying to win the smartphone and tablet wars – and even succeeding at doing so. There is a report out that indicates the very real possibility that Apple and Microsoft Corporation (NASDAQ:MSFT), thanks to licensing deals they’ve made with Android maker Google Inc (NASDAQ:GOOG) or its hardware partners, may make six times more than Google on every Android device that is sold. As an example, Apple just signed a deal with HTC, one of several Android handset markets, in which Apple will receive $6 to $8 from HTC for every device it sells next year; by contrast, it is reported that Google Inc (GOOG) could only make about $2 per device. Microsoft (MSFT), which has been working on licensing contracts with several Android partners for years, already has deals in place where it could receive as many as $5 per device – and we’re talking up to $5 for every Android device made by Samsung, Acer and LG, among others. So even though Microsoft is only trying to break into the smartphone space with its Windows Phone operating system, it is already gaining revenue from the 75-percent market share that Android owns.
What do you think about these deals? How do you think Apple Inc (NASDAQ:AAPL) investors like Julian Robertson of Tiger Management would see these deals? Would you strengthen your position in Apple, especially since it is on sale? Or would you wait until other licensing deals come to light and the litigation stops? Will the litigation ever stop?
