More than two years after Tim Apple CEO Cook said that a stock split doesn't really create value, a 7:1 split is one of several shareholder-friendly measures Apple announced this week, furthermore including a greater buyback volume and an increased dividend. All of this was received favorably by the markets, though there is no exuberance: AAPL is still trading below the closing prices of several December days.
I don't see a point in the question, raised by some people, of whether this means activist shareholder Carl Icahn "won" over Tim Cook. The stock split and the stepped-up buyback volume make sense in a way that there are no winners and losers. Apple still retains enough cash for any aquisitions it would like to make (as well as the option to do stock swaps) and could realistically run by antitrust authorities. Steve Jobs remembered the time when Apple needed a lifeline from Microsoft, but even if, in a hypothetical doomsday scenario, Apple had to offset losses at some future point in time, a crazy amount of cash reserves wouldn't be the answer. A company that has hundreds of billions of dollars in the bank and wants to offset losses of 10 billion or so per year would quickly come under pressure to return the funds to shareholders and close down shop.
The stock split is, of course, not related to fundamentals in any way. It's just that it gives small investors more flexibility about the amount they invest in Apple. If a small investor wanted to sell 20% of his GOOG holdings (another company that recently decided to do a stock split) and invest that amount in AAPL, it's now possible with a reasonable degree of granularity, while previously a small investor would have had to decide whether to own one or two AAPL shares, or none. The same would apply the other way round, of course. I have my own opinion on which company has better long-term prospects in its core business and is more likely to create the next big thing.
Even the limited effect of a stock split (on demand from small investors) is still greater than that of a potential jury verdict holding a competitor liable for infringement of patent claims covering less than a full feature that is identified as a feature by the average end user.
For three of the patent claims-in-suit, Apple's argument of its own practice is limited to past products (and Samsung disputes even that). The same patents would have broader claims that Apple could allege to read on both companies' products. But in at least one case, Judge Koh indicated to Apple that the broader claim would be ruled invalid. Apple optimized its assertions in this case, as it did in the 2012 case (which has been no game changer with respect to the "platform war" between Apple and Google, and has had an impact only because Samsung has, ever since that lawsuit was filed, taken greater care to make the visual appearance of its products more distinguishable), for "winning something at all" rather than for "winning something of major and lasting impact". Narrow patent claims don't justify huge damages claims; narrow patent claims make it harder to establish a causal nexus between infringement and alleged harm, and even if injunctive relief was granted anyway, they could be worked around.
Similarly, Apple's focus in connection with the verdict form is just to avoid a mistrial, and also to avoid that the jury gives a complex case too much thought. Apple would rather have a quick and easy win now and defend it later, even if it means one or more retrials are necessary.
With a damages claim that Judge Koh allowed to be presented to the jury but which the appeals court will most likely find should never have surmounted the Daubert hurdle, it's also hard to imagine that Apple will ever be able to enforce a damages verdict after this trial, unless the jury awards so little (which it would probably do if it figured out how many patents go into a smartphone or tablet computer) that Samsung is fine with it.
This bird-in-the-hand-NOW approach by Apple made more sense to me the first time around. At the time of the 2012 trial, this second lawsuit over potentially more impactful patents had already been filed. In fact, a first preliminary injunction (later reversed by the Federal Circuit) had already been obtained in this second case. I could have understood the point of a two-punch strategy: firstly portray Samsung as a large-scale infringer of a diversity of intellectual property rights (even if the asserted IPRs are just low-hanging fruit), then bring out the strategic guns. But this dispute has been going on now for more than three years, and no settlement has been reached (I shared my thoughts on realistic settlement terms a couple of weeks ago).
Over time, Samsung has actually become the more strategic player here and Apple is more focused on tactics. It was almost the opposite when this dispute started three years ago. And when the behavior of litigants changes over the years, litigation watchers like me also have to take note of this and draw the appropriate conclusions.
In 2011, after Apple's original complaint (an impressive masterpiece of a multi-IPR complaint), Samsung responded with scattershot litigation on three continents. I never believed that quantity (of assertions) was a substitute for quality (in terms of strength). However, considering that Samsung fended off all of Apple's European patent assertions so far (not one lasting win for Apple over a utility patent), this global approach to litigation has enabled Samsung to prove that Apple can win only in America with its frequently-biased layperson juries from which some facts must be withheld so as not to confuse them (and so as not to tell them truth about invalid patents).
In the early stages of the dispute, both parties tried to score quick wins with preliminary injunction: Samsung tried this (unsuccessfully) against the iPhone 4S in France (where I attented a related hearing) and Italy, and Apple tried in Munich (over rubber-banding, unsuccesfully), the Netherlands (where a preliminary injunction was worked around within a matter of weeks, and the related patent has since been ruled invalid in two bigger European countries), and a couple of times in the U.S. (with no lasting win either).
Trying a quick knock-out is a tactical thing. It isn't strategy, but it doesn't mean that someone isn't executing (apart from those hole-in-one attempts) a solid strategy. One can do both at the same time.
In the early stages of the dispute, Samsung was more tactical and less strategic in terms of trying to stall all the time, and by trying to get maximum leverage out of standard-essential patents. But now, Samsung made a decision that I liked very much: it withdrew its SEPs from the second California case shortly before the trial in order to have a consistent position on patent damages/royalties. During three years of litigation, this was the decision that demonstrated most clearly Samsung's focus on strategy rather than tactics. It can still assert those SEPs later. But it wasn't going to rush things at the expense of a consistent position.
By contrast, Apple is now being noticeably inconsistent with respect to the royalty base question and also in such contexts as Google's role. Apple wants the jury to believe that this is about Samsung, not Google, but Apple itself has drawn attention to the fact that Google is picking up some of the legal fees and potential damages.
Apple is just trying to obtain something that the world may perceive as a strategic victory. But Apple itself knows that at least three of the patent claims-in-suit can be worked around in ways that consumers don't even notice. Apple will also be realistic about slide-to-unlock. And the true scope of the '647 patent is somewhat unclear. Apple settled with HTC before the ITC made a decision in the enforcement proceedings Apple had triggered. Judge Posner construed the patent more narrowly than Judge Koh, and the Federal Circuit has not yet handed down its opinion on the Posner case. It may take some time before the scope of the '647 patent is really clear, but even in a best-case scenario for Apple, this patent (of which I haven't found any international equivalent) can only give Apple some limited leverage in the U.S. market, which is not enough to settle a global dispute. Outside the U.S. the related feature is much less useful in my experience. Over here I have to select and copy phone numbers most of the time because international phone numbers have formats that Google's Linkify library doesn't recognize too well. That's another reason for which I don't think the patent is too powerful in the end.
With closing arguments scheduled for today and jury instructions (and the start of jury deliberations) for Monday, I just wanted to take a high-level look at the potential impact of this. I think all that Apple can achieve is a symbolic win with a certain PR effect, but it's not going to get a huge amount of damages when all is said and done (including an appeal), it's not going to cripple Android's functionality, and it's not going to be able to force Samsung into a settlement on Apple's preferred terms. Should the jury figure out the limited scope of the patent claims-in-suit and some of the (in)validity-related issues, then the verdict itself is going to be unimpressive. But even if the verdict looked good for Apple, the ultimate business impact of this is would be very limited anyway.
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