Updated on July 5 with iPad mini information.
Paying $60 million is a small price for Apple to pay for the right to sell the iPad in China, the second-largest market for Apple.
The iPad is not Apple’s most important product — the iPhone accounts for more than half of revenues — but given the size of the Chinese market, it’s incredibly important that Apple be able to sell the product there. The settlement caused Apple’s stock to jump up by as much as 1.64% to $593 on Monday morning. By noon the stock was at $590.24.
And the iPad got more attention when rumors began to surface on Thursday that Apple was going to drop a mini version in the fall. The Wall Street Journal reported that suppliers in Asia are preparing to start production of an iPad with a smaller screen. All previous versions of the iPad have a screen of 9.7 inches, but this new iPad mini will have a screen smaller than eight inches.
The U.S. markets were closed on July 4, but on Thursday Apple's stock had climbed by 2.11% and was trading at $612.16 following the report in the Journal. This follows a stock jump from Monday's news that Apple had settled a dispute in China over the owernship of the name "iPad."
When Apple wanted to name its newest piece of technology the iPad, it had to buy the name off a struggling Chinese electronics company that held the trademark.
In February some of Apple’s iPads were pulled off shelves in China because Shenzhen Proview Technology claimed it shouldn’t be bound by the agreement because Apple misrepresented itself and what the name would be used for. A Chinese court agreed in December.
With sales hampered in China, Apple made the decision to pay $60 million to Proview to end the dispute. Having access to China could mean several million more units being sold each quarter, according to SeekingAlpha.
SeekingAlpha also estimated how much more net profits Apple could be seeing now that it can sell the iPad in China. On the low end, if Apple sells an additional 2 million a quarter, that would mean $362.9 million in net profits. On the high end, if Apple sells 4 million more a quarter, that would be an additional $725.9 million in net profits.
Overall, the price Apple had to pay of $60 million was insignificant compared to what the company can gain with unfettered access to China.
The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock.