Apple’s $100 million settlement with Creative Technology is only a “drop in the bucket” for Apple and removes potential future headaches for the company, according to one Wall Street analyst. “If Creative had been able to win any favorable rulings in the five outstanding lawsuits, Apple could have faced headaches including: further appeals, product injunctions, future and historical royalty payments,” said Piper Jaffray analyst Gene Munster. “Considering $100m represents 1.1% of Apple’s $9.2 billion in cash (at the end of the June quarter), we believe the settlement will prove to be the right course of action.”
Apple and Creative Technology today announced a broad settlement to end all legal disputes between the two companies. Apple said it will pay Creative $100 million for a license to use Creative’s recently awarded patent in all Apple products. The companies also announced that Creative has joined Apple’s “Made for iPod” program and will be announcing their own iPod accessories later this year. Creative sued Apple in May, claiming that the iPod’s interface is infringing on its “Zen Patent.” Following the company’s legal actions, Apple countersued Creative.
“Creative is very fortunate to have been granted this early patent,” said Apple CEO Steve Jobs. “This settlement resolves all of our differences with Creative, including the five lawsuits currently pending between the companies, and removes the uncertainty and distraction of prolonged litigation.”
“We’re very pleased to have reached an amicable settlement with Apple and to have opened up significant new opportunities for Creative,” said Sim Wong Hoo, chairman and CEO of Creative. “Apple has built a huge ecosystem for its iPod and with our upcoming participation in the Made for iPod program we are very excited about this new market opportunity for our speaker systems, our just-introduced line of earphones and headphones, and our future family of X-Fi audio enhancement products.”
Apple’s report of labor conditions at the Foxconn iPod plant in China has been criticized by a leading international trade union organization for not being independently verified. Janek Kuczkiewicz, director of human and trade union rights at the International Confederation of Free Trade Unions (ICFTU), said he was not impressed by Apple’s audit. “We are not impressed either by the report or by the findings of Apple,” Kuczkiewicz told BBc News. “Apple interviewed just 100 people out of the estimated 30,000 iPod workers. We do not know the conditions in which the interviews were held. We have serious reservations about the report.”
Apple Expo Paris will not host a keynote presentation this year, according to show organizers Reed Expositions. “Apple CEO Steve Jobs has traditionally popped across the Atlantic to visit Europe once a year for the show,” reports Macworld UK. “Jobs was replaced by Apple VP Phil Schiller in 2004, as he was recovering from life-saving surgery at that time. Jobs also failed to deliver a keynote speech at last year’s Paris show, though he did visit the event to speak with journalists and introduce to the iPod nano.” Europe’s largest Mac-focused event, Apple Expo Paris will run September 12 through the 16.
Apple has posted an extensive report on its findings from the company’s investigation of working and living conditions at the Foxconn iPod factory in China. Apple said its audit—which was in response to much-publicized allegations of unacceptable worker treatment—covered labor standards, working and living environment, compensation, overtime and worker treatment. “We found the supplier to be in compliance in the majority of the areas audited,” Apple said. “However, we did find violations to our Code of Conduct, as well as other areas for improvement that we are working with the supplier to address.”
Following his keynote presentation at Apple’s Worldwide Developer’s Conference (WWDC) last week, a number of publications and attendees expressed concern that Apple CEO Steve Jobs looked unwell. Most pointed out that Jobs, who underwent pancreatic cancer surgery two years ago, looked “very thin, almost gaunt” and noted that it was very odd that Jobs handed off the majority of the presentation and product announcements to other, less charismatic Apple executives, as if he was tired and needed rest. According to an Apple spokesperson, however, Jobs is definitely healthy. “Steve’s health is robust and we have no idea where these rumors are coming from,” Katie Cotton, Apple’s VP of worldwide corporate communications, told InformationWeek.
Apple has been notified by Nasdaq that the company isn’t in compliance with requirements for continued listing on the tech stock market because of Apple’s delay in filing its quarterly report. Apple said it will request a hearing before a Nasdaq panel, and that its shares will remain listed pending the panel’s decision. Apple spokeswoman Katie Cotton told the Wall Street Journal that the company expects the Nasdaq hearing to be a “multimonth process.” Apple announced last week that it would delay filing its quarterly report with the Securities and Exchange Commission because of irregularities related to the issuance of stock-option grants.
Apple’s annual Worldwide Developers Conference (WWDC) will kick off today with a keynote presentation by company CEO Steve Jobs at 10:00 a.m. PT/1:00 p.m. ET. Jobs will give the first public preview of Mac OS X 10.5 Leopard, Apple’s next major operating system upgrade. As with all Jobs keynotes, rumors are flying about what else might be announced—everything from new Intel-based “Mac Pro” desktop systems to the long-rumored iPhone. While we’ll be watching closely today for any iPod related news at the event, analysts are expecting Jobs to stick with Mac offerings. American Technology Research analyst Shaw Wu said the probability is “low” that new iPods will be introduced today. “There is always room for firsts,” Wu said. “But WWDC is a Mac event and has not been used in the past for major iPod announcements.”
Apple has announced that it will likely need to restate financial earnings and delay filing its quarterly report because of additional irregularities found in its accounting of stock options as part of an ongoing investigation. “Apple is now among the most high-profile companies caught up in a stock options scandal that has swept through the technology industry,” reports Reuters. “The SEC has more than 80 investigations underway to determine if companies manipulated the prices of stock options given to executives. Apple will likely need to restate results to record noncash charges for compensation expense relating to past stock option grants. Apple said it had not determined the amount of the charges, resulting tax and accounting impacts, or which periods may require restating.”
Apple will reports its fiscal third-quarter financial results on Wednesday after the markets close. Analysts surveyed by Thomson First Call are expecting earnings, on average, of 44 cents a share and revenue of $4.4 billion. Piper Jaffray analyst Gene Munster said he expects Apple to top Wall Street expectations on strong MacBook sales, but believes iPod unit sales could be “slightly below” forecasts.
Apple will not appeal the recent court decision that blocked its efforts to reveal the source who leaked product information to Apple enthusiast websites. CNET News.com reports: “The company’s deadline to continue a legal battle to find out who leaked the information to independent online journalists has passed, and Apple acknowledged in a brief court filing this week that it will not take its fight to the California Supreme Court. On May 26, a state appeals court rejected Apple’s attempt to send a subpoena to obtain records and archived e-mail from Jason O’Grady, PowerPage.org’s creator, and Kasper Jade, the pseudonymous publisher and editor-in-chief of AppleInsider.”
Apple said today that Yoshiaki Sakito, its vice president of marketing in Japan, has stepped down. “Sakito has been credited with leading a successful marketing push for Apple’s iPod portable digital music player in Japan,” reports AP. “The iPod has been a big success in Japan as it has in the rest of the world, dominating the market. Sakito was the most visible executive in the iPod’s Japan push, and the Nikkei said his departure highlights divisions with the managerial ranks.” Phil Schiller, Apple’s senior vice president of worldwide marketing, will replace Sakito until a successor is named.
Apple has disclosed that two derivative lawsuits have been filed against its current and former officers and directors relating to the company’s awarding of stock option grants. The suits were filed in the United States District Court for the Northern District of California and the Superior Court for Santa Clara County. Last week, Apple proactively announced that it had discovered irregularities in the issuance of certain stock option grants. The company is conducting an independent investigation into the matter and said it is currently evaluating its response to the lawsuits.
Apple said today that an internal probe had discovered irregularities related to the issuance of stock option grants between 1997 and 2001. The company confirmed that one of the grants in question was to Apple CEO Steve Jobs, but said it was subsequently cancelled and resulted in no financial gain. Apple said it has notified the U.S. Securities and Exchange Commission and that a special external committee will perform an investigation. “Apple is a quality company, and we are proactively and transparently disclosing what we have discovered to the SEC,” said Jobs. “We are focused on resolving these issues as quickly as possible.”
Apple has responded to the recent claims of poor working conditions at iPod factories in China, stating that it takes the allegations seriously and that it is looking into the charges. “Apple is committed to ensuring that working conditions in our supply chain are safe, workers are treated with respect and dignity, and manufacturing processes are environmentally responsible,” Apple said in a statement. The company said it is “currently investigating the allegations regarding working conditions in the iPod manufacturing plant in China. We do not tolerate any violations of our supplier code of conduct which are posted online.”
American Technology Research analyst Shaw Wu has offered his thoughts on Apple’s long-rumored entry into the cell phone market. “While we firmly believe that Apple has been working on cell phone technology, we believe its much hyped imminent entry is overdone,” Wu wrote in a research note to clients today. “From our understanding, for Apple to enter the cell phone market in the USA, it needs approval from the FCC. We believe a filing would be required at least three months prior to an actual product launch.” Wu said, however, that Apple could protect the news from leaking by announcing its cell phone and then shipping three months later. “This could be similar to the Intel transition where actual product shipped seven months after the announcement,” he said.
Creative Technology states in its patent lawsuit against Apple that the iPod maker approached Creative in 2001—before the introduction of the iPod—about licensing the company’s technology or investing in a possible Creative digital media player spin-off company. The Wall Street Journal reports: “Creative says in its suit that Apple CEO Steve Jobs approached a Creative employee at the January 2001 Macworld trade show and praised the Nomad, Creative’s first MP3 player. The two discussed a possible meeting, and Mr. Jobs ‘indicated Apple wanted a smaller version’ of the Nomad… The next month, according to the suit, Creative executives met again with Mr. Jobs. The suit says Apple proposed that Creative either license its technology to Apple, or spin off its portable media-player business into a separate company in which Apple would invest. Creative, however, declined Apple’s proposals. In October, Apple introduced its first iPod.”
Apple has filed a second copyright lawsuit and a U.S. trade complaint against Creative Technology, according to Channel NewsAsia. “In its latest lawsuit, Apple claims Creative is infringing three patents relating to using icons, and displaying and editing data,” reports the publication. “It is asking for cash damages and a court order to stop Creative from further breaches. At the same time, Apple wants the International Trade Commission in Washington to block imports of Creative’s music players.” Creative sued Apple last month for infringing on its “Zen Patent.” Following the company’s legal actions, Apple countersued Creative.
A California appeals court has struck down Apple’s bid to identify the sources of leaked product details that appeared on Apple enthusiast websites, ruling that online reporters are protected the same as traditional journalists. “In no relevant respect do they appear to differ from a reporter or editor for a traditional business-oriented periodical who solicits or otherwise comes into possession of confidential internal information about a company,” Justice Conrad Rushing of the 6th District Court of Appeal wrote in a unanimous 69-page ruling. “We decline the implicit invitation to embroil ourselves in questions of what constitutes ‘legitimate journalism,” he wrote. “The shield law is intended to protect the gathering and dissemination of news, and that is what petitioners did here.”
BusinessWeek has an article with several interesting details on the Apple and Nike partnership, as well as the Nike+iPod Sport Kit. The article says that Apple had approached Nike about being its MP3 player supplier, but that Nike executives had an idea for something bigger. Nike and Apple designers first met 18 months ago to create a smart shoe product, but were met with some challenges—the sneaker sensor was initially too big for Nike engineers and too small for Apple. Another challenge was battery life (close to 1,000 hours, which is said to outlast the shoes) and wireless technology. “Wireless takes power,” Apple CEO Steve Jobs said. “The last thing you wanted was a wire going down your leg. It looks deceptively simple and that’s how it should be. It took a while to get it right. But there is a lot of technology there.” Jobs said he also wanted to keep the price point low for the Sport Kit. “This thing is over 90% accurate right out of the box, which is huge. Something like this would normally cost a lot more money. We priced it so everyone can afford it because we want everyone to try it and experience how cool it is.”