Is Apple Inc. (AAPL)’s iPhone Illegal?

The U.S. International Trade Commission (ITC) just ruled that Apple Inc. (NASDAQ:AAPL) will not be able to import some of its older products intended for use on the AT&T Inc. (NYSE:T) wireless network. Some of the affected products include the iPhone 4 and iPad 2.

The ITC indicated that Apple violated patents held by the South Korean electronics giant Samsung Electronics. The ban won’t affect sales of Apple’s latest model smartphone iPhone 5, the new iPad, or earlier models of its products used on other networks.

President Obama can reverse the ruling within the next 60 days. He has disagreed with similar ITC bans in the past and has urged Congress to reduce the power of the commission.

Will the ruling take a bite out of Apple?

It could result in a short-term drop in the stock price (these sorts of things usually do), and it will generate a lot of chatter in the blogosphere, but it probably won’t affect the fundamentals all that much.

Apple Inc. (NASDAQ:AAPL) stock can’t take much more stress. It has been battered due to competition from Samsung and others, and its once-lofty market share and high gross margins are slipping. Earnings in the January to March period declined for the first time in many years.

The company has responded by raising its dividend and announcing an enhanced stock buyback program, going so far as to issue debt to do so. Apple might be in that transition from high growth to stalwart.

Will Ma Bell be affected?

AT&T Inc. (NYSE:T) has seen a run-up in its stock price over the last 18 months. Will the ruling derail it?

The company actually gives the iPhone 4 away for next to nothing if the buyer signs up for a two year service contract. With two far more advanced models available, most users opt for more capability anyway.

My thought is that AT&T Inc. (NYSE:T) won’t be impacted by the ITC ban but could be by a rise in interest rates. If the Fed ends its quantitative easing program and rates go high enough investors might want to retreat to “safer” government securities.

AT&T stock currently yields about 5.1%. The 10-year T-bond yields around 2.1% right now. There’s still a relatively wide spread. The stock is probably a better deal for someone who’s looking for income today.