The deal was prompted, he says, largely by Apple’s realization that the navigation patent gave Creative a strong legal position, and that its countersuits weren’t likely to make much progress through the courts.
“Creative is very fortunate to have been granted this early patent,” said Steve Jobs, Apple’s chief executive, in a joint statement with Creative. “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.”
While the news is terrific for Creative, whose stock price was down 60% since the start of 2005, the settlement has some unexpected consequences for its business. The most important of these is that despite its pioneering status as an MP3 player manufacturer, Creative’s move into making peripherals for its main competitor signals a major, if inadvertent, shift.
“Whether Creative knows it or not, it’s like announcing they’re going to exit the MP3 player market,” says Enderle. “You can’t make peripherals for somebody else” and get market share with rival products, he adds.
While it’s a lucrative business, he says there’s a basic weakness in the business proposition Creative has struck.
“Apple’s been going into the peripheral market more themselves recently, and it’s tough to compete with the platform owner,” Enderle says. “They know what they’re going to build before they’re going to build it.”
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