Apple Patent Flap Is on Our News Watch, but We're Not Worried
Here's our take on the Masimo technology dispute and how we could see it playing out.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
* Apple is in a patent dispute with Masimo that looks to pull some Apple Watch products from Apple's stores.
* The conflict would have a very modest impact on Apple's revenue and Apple appealed the ruling.
* Will Apple acquire Masimo if the decision goes against it?
Apple AAPL shares have stalled out over the last few days amid a patent dispute between the tech giant and Masimo MASI , a medical technology company that develops health monitoring technology. The dispute centers on blood oxygen sensing used the 9th Apple watch. In response, Applewill halt sales of its Apple Watch Series 9 and Apple Watch Ultra 2 from its online store tomorrow and at its physical retail stores on Christmas Eve. While the size of the overall Apple Watch business is a multi-billion-dollar operation, measured against Apple's entire business, those new watch models likely represent a very small revenue stream. Complicating the math, the restriction only applies to Apple's retail channels, which means other retailers and resellers such as Best Buy BBY , Target TGT , Amazon AMZN , and others can continue to offer the products. That explains the little to no impact on AAPL shares over the last few days.
While Masimo's CEO, Joe Kiani, has said he is open to settling with Apple, Apple is appealing the decision and a review is underway. The review has been delegated to U.S. Trade Representative Katherine Tai and the deadline for her decision is Christmas Day. If Tai rules against Apple, we could see Apple focus on a workaround, but the other solution could be for Apple to acquire Masimo, which has a market cap of around $6 billion. This would be easy enough for Apple to swallow, and if it came to pass it would likely follow a path it did when it acquired fingerprint recognition company Authentec -- bring the technology in-house and shun external customers.
While some may think this could be extreme, we can't rule it out especially given Tim Cook's focus on health for Apple.
AAP is long AAPL, AMZN.