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.
Springboard for Samsung?
Samsung could pick up some short-term momentum, just as Apple could see a decline, if investors think that Samsung has the ITC watching its back when it comes to older patents. Over the long-term, however, this probably will not have a big impact. I don’t think many Apple Inc. (NASDAQ:AAPL) fans will go running to Samsung because of the ban.
Conclusion
If the ruling is allowed to stand – and there is a strong chance it will be overturned – Apple Inc. (NASDAQ:AAPL) and AT&T might see a slight decline in sales if more cost-conscious buyers stay away from the stores. There actually could be an bump in iPhone 4S and 5 sales if the iPhone 4 is not available.
Samsung probably will continue to eat away at Apple Inc. (NASDAQ:AAPL)’s advantage with their current line-up of products until the “next big thing” makes its debut.
I’ll be waiting for that sometime this year, at which point the ITC ruling will have been long forgotten.
Mark Morelli owns shares of Apple and AT&T. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple.
The article Is the iPhone Illegal? originally appeared on Fool.com.
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