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Contributors: Douglas McIntyre Jon C. Ogg

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Saturday, August 26, 2006

Weekend Edition: Apple Pays $100 Million to Settle Creative Claims

Apple folds and pays $100 million to Creative.


Creative (CREAF) actually got $100 million out of Apple (APPL). Creative is another MP3 maker with a competing product that has actually been around in MP3 markets longer. Shares are now up 29% to $7.80 on this news.

So what is next? Well, you can imagine the cockroaches may come out of the woodwork to sue Apple now like Creative did. Apple must have either decided it really did hurt Creative, or they just don't want any more legal issues going on while it is having its own options "issues" in the news.

This may make the case of (BRST-OTC) seem a little stronger to the investment community. That was filed by Burst back in April, and it is probably worth noting that Burst did actually get money out of Microsoft (MSFT) in patent cases.

Also, will this lead Creative to go after other MP3 makers? SanDisk (SNDK) has been making headwinds in this area with its new consumer products. That is pure conjecture there, so don't take that as anything other than a quick thought before you do research in that area.

AppleĀ® and Creative Technology, Ltd. (CREAF) today announced a broad settlement ending all legal disputes between the two companies. Apple will pay Creative $100 million for a paid-up license to use Creative's recently awarded patent in all Apple products. Apple can recoup a portion of its payment if Creative is successful in licensing this patent to others. In addition, the companies announced that Creative has joined Apple's "Made for iPod" program and will be announcing their own iPodĀ® accessory products later this year.

"Creative is very fortunate to have been granted this early patent," said Steve Jobs, Apple's CEO. "This settlement resolves all of our differences with Creative, including the five lawsuits currently pending between the companies, and removes the uncertainty and distraction of prolonged litigation."

"We're very pleased to have reached an amicable settlement with Apple and to have opened up significant new opportunities for Creative," said Sim Wong Hoo, chairman and CEO of Creative. "Apple has built a huge ecosystem for its iPod and with our upcoming participation in the Made for iPod program we are very excited about this new market opportunity for our speaker systems, our just-introduced line of earphones and headphones, and our future family of X- Fi audio enhancement products. We expect that the one-time licensing payment of $100 million will contribute approximately $.85 of earnings per share to our current quarter, ending September 30, 2006."

Jon C. Ogg

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