The iPhone 6 has proven to be one of the most difficult product launches in Apple history. Shortly following the phone’s release, complaints started to come in about bending iPhones, operating system issues and more. Unfortunately, more bad news has started to surface; this time coming with legal action. In short, iPhone 6 customers who purchased the 16GB phone are upset because they say that the phone actually has less than 16GB of storage space. Today, we’ll take a look at the lawsuit that was filed, discuss whether or not the 16GB iPhone 6 is really a 16GB device, talk a bit about a previous lawsuit surrounding the same type of issue for Apple and the outcome of that suit, and finally we’ll discuss how investors seem to be reacting to the news and what we can expect in the near future.
Information About The iPhone 6 Lawsuit
On Tuesday, two Apple customers in Miami made the transition from customer to plaintiff as they filed a suit against the company in California’s courts with a goal to turn the case into a class action suit. The complaint is a relatively simple one; outlining that Apple falsely advertised the amount of storage space available in a 16GB iPhone. In their complaint, the Apple customers state that the operating system used to run the phone takes 3GB of storage away immediately; leading to a 19% reduction in storage space from the 16GB that has been advertised. The complaint also names Apple’s Cloud Storage service as a discrepancy that proves Apple knows about the issue. Here are a couple of quotes from the actual complaint that was filed…
“Apple’s misrepresentations and omissions are deceptive and misleading because they omit material facts that an average consumer would consider in deciding whether to purchase its products”
“Apple exploits the discrepancy between represented and available capacity for its own gain by offering to sell, and by selling, cloud storage capacity to purchasers whose internal storage capacity is at or near exhaustion.”
Is the iPhone 6 really a 16GB Device?
While I like to side with consumers as much as humanly possible, in this particular case, I think that the defense is a slam dunk for Apple; that’s because the iPhone 6 is indeed a 16GB device. One factor that’s important to understand here is how the industry standard works surrounding storage space. When consumers buy computers, cell phones, tablets, or even external hard drives, they are told the amount of space the device has when it leaves the manufacturing line. However, every single computer, cell phone, tablet, or even hard drive needs an operating system; and operating systems, just like any other program, take storage space to run. So, if you were to go purchase a 16GB external hard drive for a computer, once the operating system was placed onto the hard drive, you’d notice that you don’t have 16GB of free storage space. So, the bottom line is that the Apple iPhone6 16GB is a 16GB device regardless of how much space the operating system takes when it runs.
This Isn’t Apple’s First Rodeo
In this case, we can look to the past to see the most probable outcome. That’s because Apple has been through this issue before. In 2007, a lawsuit was filed against Apple stating that the company falsely advertised the amount of free storage space available on the iPod. In this case, customers complained that because of Apple’s operating system, the 8GB iPod only had about 7.45GB worth of free storage capacity. However, based on the same information that I shared above, this complaint was ultimately dismissed with no repercussions to apple.
How Investors Have Reacted To the News
The news of the new lawsuit broke in major publications on Friday. Unfortunately, this news obviously didn’t go over well with investors. While I don’t believe that there’s much validity to the complaint against Apple, by looking at the company’s stock chart it’s easy to see that investors seem to think that this could become a major hit. On Friday, Apple started the day off $111.04 per share. However, as more and more investors started to catch wind of the lawsuit, a sharp slide in the company’s stock price was soon to come. As a matter of fact, by 10:40 AM Apple’s stock reached the day’s low of $107.73 per share. Throughout the rest of the day, Apple would start to make a comeback; however, the company wasn’t able to recover completely from the beginning of the day drop. After a strong end of day rally, Apple closed the day at $109.30 per share.
Will This Issue Have A Long-Lasting Effect on Apple’s Stock Price?
To be honest, I think that we’ve seen the worst of the drop in stock prices that Apple’s going to see as a result of this issue; as the end of day rally on Friday proved to me that investor concerns had subsided. While there’s a little bit of a recovery left for Apple to get through, I think that we’re going to see Apple’s stock price continue moving in the positive direction. Final Thoughts While lawsuits can have a detrimental impact on stock prices, I don’t think that’s going to be the case here. In all reality, I’m on Apple’s side of the debate. The “unfair tactics” being outlined in the complaint really aren’t unfair at all. As a matter of fact, what is being called unfair tactics is nothing more than standard industry practices. So, if you’re an Apple buff like I am, don’t worry; our beloved technology giant should have no issue at all fighting this complaint. Thanks for reading and I wish you all a very Happy New Year!
