Apple 2012: Smooth sailing, for the most part, with a strong wind

SAN FRANCISCO ― Apple Inc. coasts into 2012 with a strong wind in its sails, a clutch of envelope-pushing products in its hold, a record share price, and a steady hand at the tiller.

But its very success ― with the market-leading iPad and the voice-enabled iPhone 4S ― is luring cheaper rivals to the surface.

Google Inc’s. Android, launched a few years ago and taking aim squarely at the high-end iOS, continues to attract cellphone makers. Amazon.com Inc’s. Kindle Fire, half the cost of the iPad, is expected to have chipped away at the lower end of the tablet market.

Finally, though many on Wall Street, betting that an iTV and 4G iPhones and iPads will again pack its stores, continue to bank on a share-price climb to as high as $700, some begin to question the sustainability of Apple’s torrid growth pace.

Apple tacked on $43 billion to its top line in fiscal 2011, lifting it to $108.25 billion ― a 65 percent increase from the previous year.

Barry Jaruzelski, a consumer hardware business expert and partner at consulting firm Booz & Co., said to sustain that is effectively to conjure a Fortune 500 company out of thin air ― year after year.

“You become a victim of your own success,” he said. “Can you grow the existing products that much, or can you create a new category that creates $10 billion to $20 billion? That is the challenge.”

When Apple reports earnings Jan. 24, many investors for the first time might be watching for chinks in the armor, especially given Apple’s first miss since 2004 for the October quarter.

“The risk is the sustainability of what they have been doing,” said ISI Group analyst Brian Marshall. “They have put up a huge number and the question is can they continue to penetrate with their current existing product portfolio at these price levels?”

The fear is that the number of people who can afford an iPad or an iPhone is dwindling, he added.

Apple must show patents valid in Samsung case, U.S. district judge says

SAN JOSE, Calif. ― A U.S. judge said that Samsung Electronic’s Galaxy tablets infringe Apple Inc’s. iPad patents, but added that Apple has a problem establishing the validity of its patents in the latest courtroom face-off between the technology giants.

U.S. District Judge Lucy Koh made the comments in a court hearing on Thursday, but has yet to rule on Apple’s request to bar some Galaxy products from being sold in the United States.

Apple and Samsung are engaged in a bruising legal battle that includes more than 20 cases in 10 countries as the two jostle for the top spot in the smartphone and tablet markets.

Earlier on Thursday, an Australian court slapped a temporary ban on the sale of Samsung’s latest computer tablet in that country.

Apple sued Samsung in the United States in April, saying the South Korean company’s Galaxy line of mobile phones and tablets “slavishly” copies the iPhone and iPad.

Apple then filed a request in July to bar some Samsung products from U.S. sale, including the Galaxy S 4G smartphone and the Galaxy Tab 10.1 tablet.

Mobile providers Verizon Wireless and T-Mobile USA have opposed Apple’s request, arguing that a ban on Galaxy products would cut into holiday sales.

Apple must show both that Samsung infringed its patents and that its patents are valid under the law.

Samsung attorney Kathleen Sullivan argued that in order to defeat an injunction bid, Samsung need only show that it has raised strong enough questions about the validity of Apple’s patents.

“We think we’ve clearly raised substantial questions,” Sullivan said at the hearing on Thursday in a San Jose, California federal court.

Apple attorney Harold McElhinny said Apple’s product design is far superior to previous tablets, so Apple’s patents should not be invalidated by designs that came before.

“It was the design that made the difference,” McElhinny said.

Koh frequently remarked on the similarity between each company’s tablets. At one point during the hearing, she held one black glass tablet in each hand above her head, and asked Sullivan if she could identify which company produced which.

“Not at this distance your honor,” said Sullivan, who stood at a podium roughly 10 feet away.

“Can any of Samsung’s lawyers tell me which one is Samsung and which one is Apple?” Koh asked. A moment later, one of the lawyers supplied the right answer.

Additionally, at the hearing Koh said she would deny Apple’s request for an injunction based on one of Apple’s so-called “utility” patents.

She did not say whether she would grant the injunction based on three other Apple “design” patents.

Amazon’s tablet serious challenge to Apple’s iPad, analysts say

SEATTLE ― Amazon.com Inc., which revolutionized reading with its Kindle e-reader, is expected to unveil a tablet computer this week that analysts say will seriously challenge Apple’s market dominating iPad.

Amazon on Friday invited media to a press conference to be held in New York on Wednesday, declining to provide further details.

But analysts were confident that the world’s largest Internet retailer will introduce its long-awaited tablet computer this year to expand in mobile commerce and sell more digital goods and services.

“Wednesday is tablet day,” BGC partners analyst Colin Gillis told Reuters.

The tablet has been awaited as a strong competitor to Apple Inc’s iPad. Apple has sold about 29 million of the devices since its launch in April 2010.

“The real issue here is that, you know, it is likely going to be good for consumers; is this going to be good for shareholders?,” Gillis said. He wondered whether Amazon would price the tablet below those of rivals — and thereby do little to boost margins.

“Knowing Amazon, it is likely to be a very aggressive price,” Gillis said.

In much the same way Amazon’s Kindle e-reader was priced low to quickly get traction among readers the company is likely to keep the price of its tablet low to attract users and sell other content and services, one analyst said.

“It’s a marketing tool to build a relationship with customers and sell them cloud (computing) services,” said James McQuivey, an analyst with Forrester Research.

While Amazon has remained tight lipped even about the device’s existence, the TechCrunch blog earlier this month said the Amazon tablet also will be called Kindle.

It will be a 7 inch device with a full color, touch screen, run on Google’s Android software and cost $250, the blog said, well below the price of the least expensive iPad.

Robert Baird & Co analyst Colin Sebastian said in a note last month than an Amazon tablet would be a “game-changer.” Sebastian forecast the device could sell 3 million units in its first year.

The tablet could pose a major threat to Apple because of the Kindle’s popularity and the movie and music services Amazon sells.

Forrester’s McQuivey said the device also takes aim at Barnes & Noble Inc’s. NookColor device, which hit the market last year and features tablet functionalities.

Several technology companies like Research In Motion and Samsung have introduced tablets that sold poorly. Hewlett Packard Co. announced recently it would abandon its tablet.

Amazon shares finished the day up 0.2 percent at $223.61 on Friday on Nasdaq. The stock had traded as low as $219.06, but rallied as invitations to the media event began arriving.