Apple: Their Way, No Matter What It Costs Them. Or Investors
The news that Nokia was suing Apple for patent infringement of its wireless technology was, frankly, surprising. And then when it became clear that Nokia probably only wanted about $200 million total, or 1 to 2 percent royalties, it seemed completely insane, as that is almost petty cash to Apple. But then it's easy to understand if you remember that, for all its collective brilliance, Apple can be one of the most stupid companies in the tech industry, at least if you measure by having to dig its way out of unnecessary pain.
In the cellular industry, the patent swaps and licensing are pretty well understood. Either you've done basic research and have some groundwork covered so you can force a swap of licensing with a competitor, or you have no applicable intellectual property and can expect to pay a few percent to clear your way to the market. So what does Apple do? Apparently argue for a full year and not come to basic terms that a court is very likely to enforce. Only then, it's not just $200 million, but it's your legal fees and those of the plaintiff as well as anything else that a jury tacks on.
Sure, you might keep arguing and appealing to push off the problem as long as possible. But we're talking about a well understood and long-protected set of technologies and a total of ten patents that Nokia is bringing to bear. The chances of slipping all of them start getting thin. Now consider how much $200 million means to Apple. As my journalistic colleague Tim Beyers over at The Motley Fool pointed out to me the other day, Apple has cash and cash equivalents of about $34 billion. And what do they do with it all?
The weighted-average interest rate earned by [Apple] on its cash, cash equivalents and marketable securities decreased to 1.11% in the third quarter of 2009 from 2.66% in the third quarter of 2008.Let me make a suggestion to Steve Jobs and his posse: Pay the flipping bill. It doesn't even hit 1 percent of your cash and it could easily avert a loss that could be multiple times as large, which would mean that effectively you'd get a far better return than your shareholders' investments pull down. Is there some part of penny wise and pound foolish that you don't get?
Image via stock.xchng user vidici, site standard license.