Paid Content reports: A Spanish Android Tablet Maker You’ve Never Heard Of Beats Apple In Court

As part of the process, the company’s devices got seized by Spanish customs officials and NT-K found itself listed on a piracy register, according to a blog post from the company (translated here). Then Apple’s case got expanded to a criminal suit, filed in December 2010.

Yesterday, however, a court ruled that the devices in question do not infringe the Community design rights that Apple claimed.

... NT-K now says that it will be filing an antitrust complaint against Apple, claiming loss of earnings, and loss of potential future business.

...The implications of this case could go beyond NT-K, too. Foss Patents, which brought this case to paidContent’s attention, points out that the Community design right is the same one that Apple asserted against Samsung in its cases in Germany.

What does that mean? The fact that this got overturned in Spain could come up again in those cases that Apple is bringing against Android-based device makers in Europe and potentially elsewhere, all of which are still ongoing.

I have said many times over that this litigious patent aggression is a dangerous, yet necessary game for Apple. Apple is first, and foremost, a smartphone and tablet vendor, as defined by both revenues and profits. It cannot, and I repeat,,, cannot afford a mistep and lose a strategic case, for it is already signfiicanty behind the technology curve and the market share curve as compared to Android and its top three vendors. It has already lost its app dominance, and it will be a signfiicant loss if it loses a case and is hit with punitive sanctions. As excerpted from Apple on the Margin:

... Thus, in continuing with my attempt to educate my readers on the folly of believing Apple's position to be unassailable, I am illustrating exactly how vulnerable Apple is to either a compression of margin on the iPhone or a slow down in sales. Apple is just penetrating the market and has a fertile field to conquer, it is just that it will not be able to pursue that field devoid of competition as it has over the past 3 years. This should dictate an adjustment to the highly optimistic aura attached to the multiples used in forecasting economic results.

Breaking the argument down even further, you see how the iPod and the iPhone have literally transformed this company. While I am sure it will continue to be fantastic company with cool products, I doubt very seriously that it will be able to grow in the future as it has in during the last 7 years.

The saving grace is that the smart phone and portable computing market will grow quite quickly, allowing companies with dwindling market share to still capture increasing revenues. The ugly reality is that those revenues will have to be burdened with increasing R&D, marketing and distribution costs since the amount of competition will probably scale faster than the market itself. That, my friends, is a very good thing for you and I, the consumer!

All paying subscribers are welcome to download the mini-model which shows Apple's earnings sensitivity to margin compression through competition. This is the very crux of determining the extent of Apple's success or lack thereof, in the near to medium term. Click here to download ( Apple iPhone Profit Margin Scenario Analysis Model), and click here to subscribe.

... Apple said that while iPhone sales fell off last quarter, the holiday quarter will be its best yet. First-quarter per- share earnings will be about $9.30 on sales of about $37 billion, Apple said in the statement.

That surpassed analysts’ projections, suggesting that iPhone sales are bouncing back with the release of the iPhone 4S, which set a record with debut-weekend sales of 4 million.

“In our wildest dreams, we couldn’t have gotten off to as great a start as we did with the iPhone 4S,” Cook said on the call. The drop in demand for iPhones in the second half of last quarter was “substantial,” said Cook.

This may very well be the case. I don't doubt it, but it also doesn't negate the generally stagnating growth trend - see Google's Android Now Leads In Market Share, Growth Rate and Potential Buyer Preference. Apple released a new product on two new carriers, which at best matches (and that's at best, I believe it falls far short) the Android flaghip device from 6 months ago! This much wider distribution network coupled with the iPhone popularity is bound to boost sales, but the popularity of Android (now the number 1 OS, globally and domestically, with the highest growth rate, to boot) make it unliekly Apple can regain the growth crown through marketing alone. It is now quickly becoming common knowledge that high end Android phones such as the Samsumg Galaxy S II series handily outperform anything from Apple thus far. As a result, the sales are becoming more fad generated and less technology/usability driven. We all know what happens to very fad, don't we? Apple will have to invest heavily into the tech, and that ain't free nor is it a guarantee for success. Hence the margin compression thesis. Look to my writings from last summer to determine the common sense reasons why Apple is at risk despite the lovefest that the media, the sell side of Wall Street and the equity markets have for it: How Google is Looking to Cut Apple’s Margin and How the Sell Side of Wall Street Will Enable This Without Sheeple Investor’s Having a Clue. After nearly a year of showing nearly incontrovertible evidence that Apple has seen its heyday, the mainstream media is catching on.

Watch out, Here Comes the The Fiery Sword of Truth! Contrary to the popular opinion that Goldman is the best and the brightest, Goldman Can't TRADE!!!

The financial markets are in a sense of déjà vu with widespread panic. Markets are as volatile as ever and Goldman Sachs is yet again challenged to demonstrate its ability to create alpha. The beta gazers (those who charge 2 and 20 to simply lever up on the broad market), or more commonly put, MoMo Chasers (those chasing the most popular stocks or strategies), would normally be seeking asylum given the state of recent financial markets. Unfortunately, despite the entire “God’s Work” syndrome attached to Goldman Sachs, its prop desk is yet to exhibit the ability to generate true alpha in highly volatile market, let alone match the success of BoomBustBlog.

Let's get something out in the open immediately so there is no misunderstanding. Goldman cant' trade! It can manipulate its dominant positoins in the markets. It can take advantage of the ignorance of its customers. It can front run those who don't have the reach or ability to defend themselves. It can (and obviously does) take advantage of privileged status in our political system. Those are the things that Goldman can do and apparently is skilled at, yet contrary to the popular opinion that Goldman is the best and the brightest, Goldman Can't TRADE!!! Not only that, but that inability to trade bangs the GS shareholder EVERYTIME volatility roils the markets, and causes many to overvalue GS over the long term.

For a little historical proof of this rather unpopular assertion, let's refer to the BoomBustBlog archives, namely A Few Questions on Goldman Sachs 3rd Quarter 2010 Results That No One Thought to Ask...

Trading revenues under pressure

Goldman Sachs posted Q3 net revenues of $8.9bn, a y-o-y decline of 28%. This is despite strong growth recorded at its investment banking and the asset management division which grew at 24.5% and 7.0%, respectively. The decline was principally led by dismal performance of the trading and principal transaction segment which declined 36% y-o-y as a result of weak market conditions. The decline in overall revenues despite strong growth recorded elsewhere underscores the importance of trading revenues in Goldman Sachs overall performance. Historically, trading and principal transaction segment contributed c60-65% of total revenues underpinning inherent risk in Goldman’s business model which is nothing short of a corporate hedge fund. We have expended considerable ink in demonstrating the overvaluation of Goldman Sachs and the volatility inherent in its revenues, particularly as they have been so dependent on trading - as many hedge funds are. As a matter of fact, I have been issuing this GS warning since 2009 when Goldman had perfect trading quarter and record trading profits. Reference last quarter's quarterly update: The BoomBustBlog Review of Goldman Sach’s 2nd Quarter, 2010 Performance: I Told You So!

About three months ago, Boombustblog forewarned that GS will stand out to be the worst hit in the event of trend reversal in the financial markets and the company will have little means to escape the implications of the same on its profitability and solvency. The company generates 60-70% of the revenues from trading activities which is largely dictated by the unpredictable turn of financial events. While the financial markets were celebrating the US officially coming out of recession in the 1Q10, the subsequent Eurozone crisis (see the Pan-European Sovereign Debt Crisis series) and the slowdown of expectations in 2Q10 has beaten down the irrational exuberance and the markets experienced a spurt in volatility and drop in prices. The consequent softening of trading revenues in 2Q10 vis-à-vis 1Q10 drove 31% drop in revenues and 82% drop in net income.

The chart below demonstrates how the volatility of the revenues from the trading and principal investments trickles down into volatility of the total revenues and profits of Goldman Sachs. I don’t call Goldman the world’s most expensive federally insured hedge fund for nothing!

As you can see above, volatility ramped up in 2008 and Goldman reacted like any other beta-chasing, long only hedge fund (although they aren't long only) - they lost money!

Now, with the benefit of BoomBustBlog hindsight, I'd like to announce to the release of a blockbuster document describing the true nature of Goldman Sachs, a description that you will find no where else. It's chocked full of many interesting tidbits, and for those who found "The French Government Creates A Bank Run? Here I Prove A Run On A French Bank Is Justified And Likely" to be an iteresting read, you're gonna just love this! Subscribers can access the document here:

• Goldman Sachs Q3 Forensic Review - Retail
• Goldman Sachs Q3 Forensic Review - Professional

As is customary, I am including free samples for those who don't subscribe, so you can get a taste of the forensic flavor. Here are the first 2 pages of the 19

page professional edition, with illustrative option trade setups soon to follow.

Is Goldman Sachs stock really the front running, Mo-Mo traders wet dream?

Given the high correlation of Goldman’s prop trading desk to equity markets and taking into consideration the state of equity markets in Q2-Q3, it would be interesting to see how Goldman Sachs share perform in the coming quarters. Those who would have followed the traditional school of thought and bid the price up would have already seen their capital erode by 20% during the last quarter and by 12% over the last one month alone.

Oh, and while we're at it...

I noticed ZeroHedge (one of the few sites that I syndicate BoomBustBlog content through) caused a tiff with the Canadian academia and pop media by calling attention to the abysmally low TEC ratios of Canadian banks, and comparing them to European banks. For those who didn't have the spare time to catch the cross border banking media soap opera, see:

1. Is The Next Domino To Fall.... Canada? for the first salvoo
2. Who is Zero Hedge, and why should we care? for the passive aggressve retort
3. (as put by Tyler himself) "followed by a more coherent attempt to debunk the claim that a painfully low TCE ratio is never a good thing": Is Zero Hedge looking at the wrong numbers?"

I must say that the argument by those up north is wanting and ZH made a valid point, primarily in that the RWA (risk weighted asset) methodologies are simply too open for manipulation. Of course, that is probably why they are favored by the banking institutions. Let's end this morning's post by illuminating the fact that although, Goldman Sachs capital ratios have improved, it has nothing to do with a reduction in risks weighted assets. Risk weighted assets, to the contrary, have increased to $451bn as at end June 2011 from $384bn as at the beginning of 2009. One of the key reasons for increase in capital ratios have been dilutions. As a matter of fact, Goldman Sachs’ diluted shares outstanding have increased by c24% since beginning of 2008!

So, if Goldman really has a problem, why haven't we heard about it from the rest of Wall Street?

Because investment performance is not the Street's business model. If it was, they would have easily foreseen thier own demise back in 2008/9. The street's busness model is churning spreads, fees and commisions from clients and customers. I truly believe BoomBustBlog bests ALL of Wall Street's sell side research, reference Did Reggie Middleton, a Blogger at BoomBustBlog, Best Wall Streets Best of the Best? After all, who else is currently warning of Goldman's risk on the Street? Answer: No one! Then again, who warned back in the summer of 2008 before the share price got cut by nearly 2/3rds? I can only think of one shop....

Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street: ...t shared by most of the analyst community and those that follow them. This brings me to the issue of Goldman Sachs. I have been bearish on commercial, mortgage and investment banks for over a y... Saturday, 05 July 2008

Reggie Middleton on Risk, Reward and Reputations on the Street: the Goldman Sachs Forensic Analysis: Here is my detailed opinion on Goldman Sachs. Be sure to review my precursor to this report: Goldman Sachs Snapshot: Risk vs. Reward vs. Reputations on the Street. Anybody who is interested in how I Thursday, 24 July 2008

Even after a clear pattern was formed, who on the sell side warned when the markets got rocky in 2010? Hmmm. I sense a trend here... If I may prompt one to reminesce: In What Do Goldman Sachs and B.B. King Have in Common? The Thrill is Gone…,, I made the following note:

GS’s considerable leverage provides a means (the lever) of high returns to shareholders when asset prices are appreciating but the same becomes a very material economic concern when the asset prices lose value. With low trading revenues, GS has little cushion to absorb write-downs on these assets, leading to erosion of equity. As of March, 2010, the GS’s investments portfolio amounted to $339 billion (nearly 566% of the tangible equity). Referencing my previous posts, “Can You Believe There Are Still Analysts Arguing How Undervalued Goldman Sachs Is? Those July 150 Puts Say Otherwise, Let’s Take a Look” and “When the Patina Fades… The Rise and Fall of Goldman Sachs???“, we can reminisce over the fact that Goldman BARELY earns its cost of capital on an economic basis, and that’s before considering the potential horrors which may (and probably do) lay on the balance sheet (for more on BS horror, referenceReggie Middleton vs Goldman Sachs, Round 2) .

As for the Canadian media's retorts on ZeroHede's credible article, I must dare, no... make that double dare, any one to ask in print or on TV, "Who is Reggie Middleton". As a matter of fact, I'll answer that question right now. He's the guy that called...

1. The housing market crash in the spring of 2006 and publicly in September of 2007: Correction, and further thoughts on the topic and How Far Will US Home Prices Drop?
2. Home builders falling and their grossly misleading use of off balance sheet structures to conceal excessive debt in November of 2007 (not a single sell side analyst that we know of made mention of this very material point in the industry): Lennar, Voodoo Accounting & Other Things of Mystery and Myth!

3. The collapse of Bear Stearns in January 2008 (2 months before Bear Stearns fell, while trading in the $100s and still had buy ratings and investment grade AA or better from the ratings agencies): Is this the Breaking of the Bear? | After the collapse, a prudent bullish call as well... Joe Lewis on the Bear Stearns buyout Monday, March 17th, 2008: "The problem with the deal is that it is too low, and too favorable for Morgan. It is literally guaranteed to drive angst from the other side. Whenever you do a deal, you always make sure the other side gets to walk away with something.  If you don’t you always risk the deal falling though unnecessarily. $2 is a slap in the face to employees who have lost a life savings and have the power to block the deal. At the very least, by the building at market price and get the company for free!" | BSC calls are almost free and the JP Morgan Deal is not signed in stone Monday, March 17th, 2008 | This is going to be an exciting, and scary morning Monday, March 17th, 2008 | As I anticipated, Bear Stearns is not a done deal Tuesday, March 18th, 2008 [Bear Stearns stock goes from $1 and change to $10, front month calls literally explode from pennies to several dollars]

4. The warning of Lehman Brothers before anyone had a clue!!! (February through May 2008): Is Lehman really a lemming in disguise? Thursday, February 21st, 2008 | Web chatter on Lehman Brothers Sunday, March 16th, 2008 (It would appear that Lehman’s hedges are paying off for them. The have the most CMBS and RMBS as a percent of tangible equity on the street following BSC. The question is, “Can they monetize those hedges?”. I’m curious to see how the options on Lehman will be priced tomorrow. I really don’t have enough. Goes to show you how stingy I am. I bought them before Lehman was on anybody’s radar and I was still to cheap to gorge. Now, all of the alarms have sounded and I’ll have to pay up to participate or go in short. There is too much attention focused on Lehman right now. ) | I just got this email on Lehman from my clearing desk Monday, March 17th, 2008 by Reggie Middleton | Lehman stock, rumors and anti-rumors that support the rumors Friday, March 28th, 2008 | It appears that I should have dug deeper into Lehman! May 2008
5. The fall of commercial real estate in general (September of 2007) and the collapse of General Growth Properties [nation's 2nd largest mall owner] in particular (November 2007): BoomBustBlog.com’s answer to GGP’s latest press release and Another GGP update coming… (among over 700 pages of analysis, review the January 2008 archives or search for “GGP” for more research).
6. The collapse of state and municipal finances, with California in particular (May 2008): Municipal bond market and the securitization crisis – part 2
7. The collapse of the regional banks (32 of them, actually) in May 2008: As I see it, these 32 banks and thrifts are in deep doo-doo! as well as the fall of Countrywide and Washington Mutual
8. The collapse of the monoline insurers, Ambac and MBIA in late 2007 & 2008: A Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton, Welcome to the World of Dr. FrankenFinance! and Ambac is Effectively Insolvent & Will See More than $8 Billion of Losses with Just a $2.26 Billion
9. The overvaluation of Goldman Sachs from June 2008 to present): “Can You Believe There Are Still Analysts Arguing How Undervalued Goldman Sachs Is? Those July 150 Puts Say Otherwise, Let’s Take a Look”, “When the Patina Fades… The Rise and Fall of Goldman Sachs???“andReggie Middleton vs Goldman Sachs, Round 2)
10. The ENTIRE Pan-European Sovereign Debt Crisis (potentially soon to be the Global Sovereign Debt Crisis) starting in January of 2009 and explicit detail as of January 2010: The Pan-European Sovereign Debt Crisis
11. Ireland austerity and the disguised sink hole of debt and non-performing assets that is the Irish banking system: I Suggest Those That Dislike Hearing “I Told You So” Divest from Western and Southern European Debt, It’ll Get Worse Before It Get’s Better!
12. The mobile computing paradigm shift, May 2010: More on the Creatively Destructive Pace of Technology Innovation and the Paradigm Shift known as the Mobile Computing Wars! »
13. The French bank run of 2011