Apple May Compensate Customers for Processor Throttling

Customers may soon be compensated by technology giant Apple (AAPL) for its initial approach to iPhone processor throttling. Federal District Judge Edward Davila preliminarily approved a maximum $500 million settlement for customers who complained that Apple slowed down certain iPhones without informing them, calling the deal “fair, reasonable and adequate.” However, Davila would like to postpone a final approval hearing until December, citing concerns about Covid-19.

According to Apple, the throttling technique was done to extend the lifespans of phones by reducing the likelihood of sudden phone shutdowns as their batteries wore down over time. The company failed to disclose and explain that to customers, however, which led some customers to think that purchasing a new phone would solve the problem. The lawsuit covers people who used the iPhone 6s, iPhone 7 and original iPhone SE before December 21st, 2017.

The proposed settlement would pay each iPhone user $25, or up to $500 per person if the total payouts, attorney fees and expenses don’t reach a minimum of $310 million.

Apple, the world’s second most valuable company with a market cap of $1.33T, has fared relatively well during the Covid-19 era, dropping initially and then recovering.

Morgan Stanley analyst Katy Huberty estimates that Apple’s App Store net revenue grew 31% year-over-year in the month of April, leading to its strongest month in over two and a half years. Total App Store downloads grew 40% year-over-year, said Huberty, who called this the strongest download growth figure since 2015. The analyst, who believes lockdown restrictions have been the primary driver of the App Store’s recent performance, expects April will mark the peak in App Store growth rates this quarter.

The stock is up slightly year-to-date at $307 a share, with a Strong Buy consensus and an average price target of $317, representing 3% upside over the next 12 months. (See Apple stock analysis on TipRanks). 

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