The hope among investors and on Wall Street was that Apple (AAPL) would show revenue growth when it reported its fiscal first quarter earnings in January. That growth would be the first in a year after four straight quarters of falling sales. That’s the longest streak of declining quarterly sales in two decades.
But now a patent decision against Apple will take some of its best-selling Apple Watch series, the Series 9 and the Ultra 2, off the market just as the holiday selling season is peaking. The company said it will stop sales of those Apple Watch models at its online store on December 21 and at its 270 physical retail stores on December 24.
The International Trade Commission ruled in October that Apple has violated patents held by Masimo, a California company that sells health monitoring technology, on how the watches calculate a user’s blood oxygen levels. The decision said that Apple would need to halt sales of Apple Watch models that use that technology.
The White House is conducting a review of the order. The Obama administration overturned a ITC ruling against Apple over iPhone and iPad patent claims by Samsung Electronics. The difference this time is that both parties are U.S companies. The review period ends on December 25.
“The ITC found that Apple stole Masimo’s patented pulse oximetry technology, which measures blood oxygen,” Masimo said in a statement. “The ITC undertook a thorough legal process and its expert judgment in this matter should be respected, protecting intellectual property rights and maintaining public trust in the United States’ patent system.”
Apple plans to appeal the decision.
The Series 9 and Ultra 2 models generate the vast majority of Apple’s watch sales. The company doesn’t say how much revenue the product line brings in, but it’s a core part of its Wearables, Home and Accessories business, which generated more than $40 billion a year in fiscal 2023. Analysts estimate that Apple Watch revenues totaled about $17 billion in fiscal 2023, which ended in September.
This patent rule covers a hardware patent, which means that Apple can’t quickly fix the problem with a software update, a solution that company has used in the past. If the ruling stands, it’s not clear how long it would take Apple to redesign the Apple Watch series in question.
Apple shares were down slightly on Monday, December 18, falling 0.85% to $195.89. The stock is up 52.79% for 2023 as of Friday, December 15. In the last three months Apple shares have gained 13.03% through December 15 against a 3-month gain of 6.78% for the Standard and Poor’s 500.
