Canaccord Genuity Morning Coffee on Apple (AAPL): KEYWORD: Wilful

August 28, 2012 10:36 AM EDT
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Canaccord Genuity Morning Coffee on Apple (Nasdaq: AAPL): KEYWORD: Wilful.

Late Friday, a federal court jury ruled in favour of Apple, finding Samsung had been guilty of infringing on six AAPL patents on more than a dozen devices and awarded AAPL $1.05 billion in damages. The jury ruled Samsung's infringement of APPL's patents was wilful in that the parent company induced subsidiaries to infringe. Samsung's response to the verdict: "It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners, or technology that is being improved every day by Samsung and other companies." Samsung said it plans to appeal its loss to AAPL. Canaccord Genuity Tech Analyst Michael Walkley believes that following the decision, Apple has an even stronger competitive market position ahead of its iPhone 5 and other anticipated product launches. He believes this verdict could lead to Samsung delaying near-term product launches. Additionally, he sees other Android OEMs such as HTC, Sony (NYSE: SNE) and LG reviewing this patent verdict and potentially altering and delaying planned Android smartphones and tablets. Friday also marked the one year anniversary of Tim Cook's appointment as CEO of Apple - shares are up ~87% since he took the reins. Walkley had this to say about Cook at the time of his appointment: "We believe new CEO Tim Cook is well qualified for the role as he has led Apple as interim CEO on two occasions during Jobs’ medical leaves of absence. Mr. Cook is a universally regarded as a strong leader and supply chain expert, and we believe he is well suited to lead Apple to significant growth over the next few years due to Apple’s leading iOS developer and application ecosystems and differentiated products. Further, we believe Apple has a deep and talented executive team in the areas of supply chain management, hardware/software design, and product marketing." It hasn't been all smooth sailing for Cook, last month Apple reported Q3/12 results below Walkley's and consensus estimates. Walkley believes the weaker September quarter guidance includes softer iPhone sales due to the iPhone 5 transition. Walkley maintains his belief that APPL is well positioned for strong F2013 growth driven by new product launches across its portfolio, including iPhone 5 this fall and iTV in F2013. Separately, rumors have AAPL considering a share split to improve its inclusion the Dow Jones Industrial Average Index. Credit Suisse published five facts about the likelihood and implications of the event: i) Changes to the Dow are not trading events, because there is not a material amount assets benchmarked to the index; ii) AAPL almost certainly needs to implement a share split to be seriously considered, since the index is price-weighted, and at its current price AAPL would make up over 25% of the index; iii) The Dow is currently underweight tech compared to more sensibly constructed indices and has lagged the S&P 500 this year in performance; iv) The index generally implements changes due to a corporate event trigger. The upcoming Kraft Foods (NYSE: KFT) spin-off may fit the bill; and v) The company with the smallest market cap in the index is Alcoa (NYSE: AA).

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