Today: Judge rules that Apple (AAPL) entered antitrust conspiracy with book publishers to raise prices of electronic books, but what difference will the ruling make? Also: Hewlett-Packard (HPQ) loses lead in PC shipments, but stock is hot.
The Lead: Apple may face long legal road after antitrust conviction
A judge ruled Wednesday that Apple and book publishers illegally colluded to drive up the price of electronic books, citing the words of late Apple co-founder Steve Jobs as the basis for the conspiracy, but e-book consumers may not notice much of a difference in the wake of the ruling. The Cupertino tech giant will not avoid the effects of the ruling, however, vowing to appeal the verdict while it could also face civil litigation.
U.S. District Judge Denise Cote ruled that Apple committed antitrust offenses by joining book publishers in establishing an "agency model" for e-books, in which Apple was granted favored status that allowed it to establish the price for e-books, which other retailers had to follow. Then-CEO Steve Jobs reached the deal with book publishers in advance of the iPad's debut, when Amazon was selling e-books for $9.99; Amazon was forced to sign deals with the publishers guaranteeing they charged the same price as Apple or face not receiving the e-books at all.
"We'll go to the agency model, where you set the price, and we get our 30 percent and yes, the customer pays a little more, but that's what you want anyway," Jobs told the publishers, according to his recounting to biographer Walter Isaacson.
After the iPad's arrival in 2010, Apple established $14.99 as the preferred price point for new books released in hardcover in print.
"The conspiracy succeeded," Cote wrote in her ruling of the resulting increase in e-books prices. "It not only succeeded, it did so in record-setting time and at the precise moment that Apple entered the e-book market."
The results of Cote's ruling will likely be minimal for consumers: The five book publishers settled with the Justice Department after charges were originally filed, avoiding the legal beatdown Apple suffered. E-book prices have not fully retreated to the $9.99 price that Amazon was pushing when Apple made its move, and prices do not appear to be greatly different between iTunes and Amazon.
On Wednesday, three e-books that are among the 10 bestsellers for both companies had the same price at both outlets: "Inferno," by Dan Brown, cost $12.99; "Second Honeymoon," by James Patterson, cost $9.99; and "And the Mountains Echoed," by Khaled Hosseini, cost $10.99. Only the latest release by Fremont author Hosseini was published by one of the companies involved in the dispute, Penguin.
For Apple, the effects could take a while to determine. The most immediate move will be an appeal: Apple spokesman Tom Neumayr confirmed Wednesday the company will attempt to reverse the decision and maintains its innocence.
"Apple did not conspire to fix e-book pricing," he told Reuters. "When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon's monopolistic grip on the publishing industry. We've done nothing wrong."
However, legal experts said an appeal was unlikely to fully succeed -- "They can appeal, but appealing factual findings is rowing upstream," Columbia University law professor Tim Wu told a Wall Street Journal blog -- and Apple will probably face a full-fledged civil assault from consumers who overpaid for e-books due to Apple's actions.
"The verdict clearly makes a lawsuit more valuable," University of Iowa antitrust expert Herbert Hovenkamp told the Journal.
Attorneys general in some states are already seeking redress for their constituents, but a class-action suit could cost the company millions, n not long after it settled a similar action involving app purchases by children of Apple device owners.
Investors, who have already driven Apple shares down more than 40 percent from highs reached late last year, did little additional damage Wednesday following the ruling: Apple stock declined 0.4 percent to $420.73.
SV150 market report: Hewlett-Packard gains despite losing title of top personal-computer maker
While Apple stock declined, tech stocks in general gained on a ho-hum day for Wall Street, with the SV150 and tech-heavy Nasdaq easily outpacing the Dow Jones and Standard & Poor's 500 indexes. The SV150's gain was helped by Hewlett-Packard's ability to set a new 52-week high for its shares despite officially losing its crown as the world's largest personal-computer company.
HP shares gained 1.8 percent to $25.93 and hit the highest intraday price in the past year at $25.93 Wednesday, but the two most prominent tracking services for PC shipments agreed that China's Lenovo outproduced HP in the second quarter. The Palo Alto tech giant, which has been the world's largest PC manufacturer since at least 2006, was reported by Gartner to have lost its crown in the fourth quarter of last year, but IDC's numbers showed HP still in the lead; on Wednesday, both firms' quarterly reports showed Lenovo shipping more than 200,000 more PCs than HP in the three-month period, with HP's sales declining 4.8 percent year-over-year in Gartner's estimation and 7.7 percent in the eyes of IDC.
HP shares withstood that news thanks to Citi analyst Jim Suva's drastic upgrade of the company. Suva upgraded the company from "Sell" to "Buy," skipping right past the "Hold" rating, explaining that HP will likely start gaining in earnings next year. The IDC and Gartner reports also focused on long-term optimism for the PC industry, with severe decreases beginning to beat projections. "We're also starting to see more stabilization in shipments, which we think is a reflection of PC lifetimes finally starting to even out after a long period of gradual increase," IDC's Bob O'Donnell said Wednesday. Gartner Mikako Kitagawa explained, "Our preliminary results indicate that this reduced market decline was attributed to solid growth in the professional market," possibly related to Microsoft ending support for Windows XP.
Other companies that rely on PCs for a large bulk of its earnings also found market gains: Intel (INTC) increased 0.5 percent to $23.25, reversing its recent slide; Microsoft gained 1 percent to $34.70 a day ahead of an expected reorganization; and chip-equipment company Applied Materials continued its recent surge, moving 4.1 percent higher to $16.30.
Google (GOOG) has managed to avoid the pitfalls of the PC decline with solid sales of its Chromebooks, which have accounted for up to a quarter of laptop sales totaling less than $300 in the past 8 months; the Mountain View search giant gained 0.1 percent to $905.99. Facebook increased 1.3 percent to $25.80 and announced that Instagram photos and videos will be embeddable, while Zynga moved 1.5 percent higher to $3.39 while showing off its first real-money games for the Facebook platform in Europe. Yahoo (YHOO) dropped 0.4 percent to $26.56 while fighting to reveal records from its court fight against the National Security Agency's Prism requests.
The SV150 index of Silicon Valley's largest tech companies: Up 4.93, or 0.39 percent, to 1,270.4
The tech-heavy Nasdaq composite index: Up 16.5, or 0.47 percent, to 3,520.76
The blue chip Dow Jones industrial average: Down 8.68, or 0.06 percent, to 15,291.66
And the widely watched Standard & Poor's 500 index: Up 0.3, or 0.02 percent, to 1,652.62
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.