Apple AAPL takes on Vestager in the EU, battles with a consumer class action lawsuit over AppleCare, invests in Corning GLW plant and analysts see an encouraging initial iPhone sales trend.
EU Tax Battle
EU Competition Commissioner Vestager has been a big headache for American tech firms. In her determination to see that individual member nations don’t use their tax laws to create unfair competition within the EU, she has been targeting one company after another. But the biggest of these are Apple in Ireland and Amazon AMZN in Luxemburg.
Apple’s deal allowed it to pay tax at a 0.005% rate in Ireland, according to Vestager, which she determined was illegal state aid. The calculated back taxes of 13 billion euros ($14.4 billion) are now sitting in an escrow account. Ireland, which has been complicit in the matter, is of course also appealing the ruling.
The case is now at the EU General Court in Luxembourg. It can be appealed once more at the European Court of Justice.
Apple holds that it was in compliance with Irish and EU law at the time and that the lawsuit is a result of applying new law retrospectively. It could also argue that since most of its intellectual property was located elsewhere, that was where its tax liability lay.
Win or lose, Vestager in her new role as executive vice president in charge of digital policy, could determine new rules for the taxation of digital firms in the EU. This could ultimately also play a role in the overhaul of global tax rules.
Refurbished Units in AppleCare
U.S. District Judge William H. Orrick has certified a group of consumers to continue with a class action lawsuit against Apple for providing refurbished products under its AppleCare and AppleCare+ protection plans.
Consumers paid up to $129 for its AppleCare plans and upwards of $99 in additional cost for device replacement. Apple sold 3 million AppleCare and AppleCare+ service plans, where it provided at least one replacement device, according to its own records. However, many of these were remanufactured.
Apple was also denied summary judgement on Sep 17 as the judge disagreed with Apple’s view that the plaintiffs’ complaint was untenable because it hinged on an interpretation of the contract that is “unrealistic and unsupportable”. The judge relied on the expert opinion of Michael Pecht, who said that that any device with a non-new component cannot be equivalent to new and Apple promised “new or equivalent to new” components in its contract with consumers.
Apple Invests in Corning Plant
Apple is investing $250 million in Corning’s Kentucky manufacturing plant to ensure continued supply of glass for its iPhones and other devices. The relationship between the two dates back to the time that the iPhone was launched. This also isn’t the first time that Apple has invested in the company. In 2017, Apple’s Advanced Manufacturing Fund forked out $200 million for Corning.
In the words of Jeff Williams, Apple’s COO, “This award underscores Apple and Corning’s shared belief in the vital role that ingenuity plays in creating industry-leading products, and the pride that both companies take in applying American innovation and advanced manufacturing to solve some of the world’s toughest technology challenges.”
Huawei Challenge to iPhone 11 Launches
At the first product launch since the Chinese firm was banned from selling in the U.S. and the country’s firms banned from supplying to it, Huawei launched its Mate 30 smartphone. It was a flashy event in Munich Germany.
The company claims that the devices are more compact, their cameras more sensitive, and their wraparound screens more vivid than those of the latest Apple iPhone. Connectivity is also supposed to be 50% faster than market leader Samsung's fifth-generation (5G) phones. There was also a comment on the absence of Alphabet’s GOOGL Android.
Chief salesman Richard Yu agreed that "Yes, we have some limitations on Google Mobile Services” (they aren’t getting any, the phone’s running on stock Android with Huawei’s own apps). This isn’t supposed to be a problem because “we have a huge advantage with the phone itself." After all, "This is the best-performing smartphone in the world.”
New iPhones Selling Better Than Predecessors
Wedbush and Instinet analysts reportedly found data trends indicating that the latest generation iPhones are selling better than their predecessors. This is encouraging given that this iteration wasn’t much of an upgrade over the previous one, which along with the availability of comparable and in some respects, superior smartphones, didn’t look good for device sales.
Daniel Ives of Wedbush found that “delivery times extend[ed] across a number of models with many iPhones now slated for delivery two to three weeks after the Sept. 20 official release date.” His data analysis indicates strength in the space gray and gold models as well as “some variants of the 256G iPhone 11 Pro” He thinks that Apple’s fortunes in the quarter are tied to the 60-70 million iPhones that are upgradeable in China. So he expects sales to be respectable if even half of those are upgraded.
San Francisco-based consultancy Prophet’s annual survey of 13,500 Chinese consumers isn’t positive about Chinese sales. According to the survey, Apple has dropped to number 24 among the country’s top brands. It was number 11 just a year ago.
Jeffrey Kvaal of Instinet says, “While shipment times reflect the balance of supply and demand, our supply chain work indicates supply is flat year over year,” and “we interpret that to mean the 11 is off to a healthy start in the U.S.”
Apple’s Fifth Avenue Shop Gets Facelift
Apple’s Fifth Avenue store was opened up for shoppers so they could make the most of its recent product launch. The once-popular destination for shoppers, window shoppers, those getting their devices fixed and others, has been under renovation for around three years.
Other than the snazzy look where tall trees surround a high-ceilinged central shopping plaza reflecting the play of natural and artificial light and headed by the distinctive luminous glass cube, Apple appears to have focused on size and ease-of-shopping.
Its increased focus on services may have had something to do with the fact that the service zone called Genius Bar has been more than doubled. The renovation area is also double as customers often have long wait times. There are also two gateways to facilitate traffic flow.
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