Mum's the word. That's just par for the course for anyone dealing with Apple (NASDAQ:AAPL). That includes Taiwanese gadget maker HTC, who just settled its long-standing patent disputes and made peace with the Mac maker by inking a decade-long licensing deal. All we know is that the agreement covers current and future patents, but everything else is "confidential."
There are a lot of interested third parties wanting to know how much HTC is sending to Cupertino as part of the agreement -- notably Samsung -- since which specific patents Apple is licensing to its Android brethren could have some bearing on its own patent litigation with Apple.
Analysts have estimated those fees to be in the range of $6 to $8 per unit, which could amount to roughly $180 million to $280 million in annual licensing fees depending on how many gadgets HTC ships. Except HTC claims we're all wrong about its deal with Apple, though, with CEO Peter Chou recently saying:
I think that these estimates are baseless and very, very wrong. It is a outrageous number, but I'm not going to comment anything on a specific number. I believe we have a very, very happy settlement and a good ending.
HTC has already said the deal wouldn't affect its fourth-quarter guidance, which calls for revenue of approximately $2 billion, gross margin of about 23%, and operating margin in the ballpark of 1%. Since licensing expenses should be factored into cost of goods sold, if HTC were taking a hit on licensing fees, its gross and operating margins guidance would be affected.
Android has never been free despite being open source. While Android vendors don't pay Google (NASDAQ:GOOGL) any direct licensing fees, nearly all of them already send royalty checks to Microsoft (NASDAQ:MSFT). If Apple inks more deals with more Android OEMs, gadget makers will be paying both Microsoft and Apple for Android, while Google hopes to make money off its ads and services.
The royalty estimates floating around may be wrong, but there's one fact that HTC can't argue with: the cost of doing Android business just went up.
Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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