Yet Another Victory for Apple

Zacks Equity Research, on Wednesday August 10, 2011, 9:45 am EDT

Apple Inc.(NasdaqGS: AAPL – News) has won an injunction against Samsung Electronics Co., as a German court barred the latter from selling its Galaxy Tab 10.1 touchscreen tablets in the European Union.

however, the ruling has kept Netherlands out of the fray and has not implemented any restriction on Samsung in the region. Thereafter, Apple filed a separate patent infringement case in the Netherlands, which is scheduled for hearing on Wednesday.

Samsung’s Galaxy Tab 10.1 was released earlier this summer and is touted to be one of Apple’s strongest competitors in the tablet market. The tablet, which uses Google Inc.’s (NasdaqGS: GOOG – News) android operating system, is gaining popularity. This compelled Apple to file the lawsuit in a bid to protect its intellectual property and claimed that Samsung copied the iPad tablet in some respects.

Earlier in April 2011, Apple filed lawsuits, in the California court against Samsung, claiming infringement of seven patents related to the Galaxy devices’ mechanism of interpreting user gestures, including selecting, scrolling, pinching and zooming. Apple also accused Samsung of copying three design patents, including the flat black face of the iPhone and iPad. The suit also covers the Epic 4G and the Nexus S products from Samsung.

Apart from Germany, the two companies have locked horns in patent infringement cases in South Korea, Japan and the United Kingdom.

Apple has been defending its intellectual properties with all its might and won an important victory against smartphone maker HTC Corp., after the International Trade Commission (ITC) agreed to review its patent infringement complaint against the Taiwan-based company.

Apple is facing tremendous competition in the tablet and smartphone markets from a number of companies, including Samsung, Motorola, HTC and LG. Android, being an open source operating system, has helped Apple’s competitors create varied devices based on the free source code.

Apple continues to face tough competition in the smartphone and tablet markets from Research in Motion Ltd. (NasdaqGS: RIMM – News), Hewlett-Packard Co. (NYSE: HPQ – News), Dell Inc. (NasdaqGS: DELL – News), Samsung, Cisco Systems Inc. (NasdaqGS: CSCO – News), Toshiba and Acer.

Additionally, the impending lawsuits against several companies will remain an overhang on the stock going forward as the outcome remains uncertain.though, positives can be derived from the various lawsuits that it has won in the recent past.

Apple has been consistently scaling new heights, which was evident from its last quarter results that showed revenues and earnings to have grown 82.0% and 122.0%, respectively, on a year over year basis. It has already established itself as the leading smartphone maker during the second quarter of 2011 and the release of the iPhone 5 in September will ensure that it continues to dominate the market.

Moreover, recognized revenues from sales of iPad and iPad accessories during the last quarter totaled $6.05 billion, up 179.0% year over year and 113.0% sequentially.

Apple’s ability to spur the popularity of the products in developing nations, where it’s less successful, will help dictate the company’s fortunes in future.

We maintain our Neutral rating over the long term (6-12 months). Currently, Apple has a Zacks #1 Rank, which implies a Strong buy rating in the near term.

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