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Apple Loop: Considering iPrefs, Patenting The iWatch, Living In A 'Weird' Post-Jobs World

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Keeping you in the loop about a few of the things that happened around Apple this week.

Greenlight and Prop 2. A U.S. judge sided with Greenlight Capital and hedge fund manager David Einhorn today, blocking Apple from having shareholders vote next week on a proposal that Greenlight says limits the company’s ability to issue preferred stock that would trade along with the Apple’s common stock. At issue is Proposal 2, which Apple had asked shareholders to vote at its annual meeting on Feb. 27 as part of a package that includes four amendments to its Articles of Incorporation. The judge sided with Greenlight and said bundling the four proposals and asking for a single vote on them wouldn’t fly. Here’s some background, in case you haven’t been following along. Apple’s board has “blank check” authority to issue preferred stock, which means it has the power to issue such stock at will. Einhorn, who’s been buying up Apple shares since 2010 and owns more than 1.3 million shares , approached the company back in May 2012 and asked that it use its power and offer a perpetual preferred stock (his so-called “iPref” would pay an annual dividend of 4 percent a year, or $2). That preferred stock, Einhorn has said, will return some of Apple’s more than $137 billion in cash to current investors as well as get new investors interested in the shares. His thoughts – and his math on iPrefs -- are spelled out in a detailed presentation he gave yesterday and which you can find here.

According to today’s ruling (click here to read that), Apple started the process of removing the blank check provision in May 2012. It decided in September 2012 to reject Einhorn’s plan and go ahead with Prop. 2. Apple CEO Tim Cook said this month that Prop. 2 doesn’t means Apple can’t issue preferred shares, it just means that without the blank check authority, shareholders would have to vote on any preferred stock.  On Feb. 7, Einhorn asked Apple not to have Prop. 2 bundled along with the three other changes and to allow shareholders to vote on it separately. Apple declined so Greenlight Capital filed a lawsuit and the two sides met in court on Feb. 19 to argue the case. Today, the court said it agrees with Greenlight that Prop. 2 shouldn’t be bundled along with the three other proposed amendments. So, that’s where things stand. Cook earlier this month called Greenlight’s suit a “silly sideshow” because they’re opposed to a proposal that he said gives more power to shareholders. Some big Apple investors agree, with the California Public Employees' Retirement System saying Prop. 2  helps advance shareholders rights. Cook also said Apple’s board is considering the iPref proposal as part of its “active” discussions on whether to return more cash to shareholders. Apple, by the way, hasn’t issued preferred shares since 1997, the year former CEO Steve Jobs returned to lead a turnaround. Expect Cook to have a lot more to say about those discussions when he addresses shareholders next week at Apple's headquarters in Cupertino, California.

iWatch patent. The rumors that Apple is working on a smart watch have picked up in recent weeks after former Apple human interface designer Bruce Tognazzini did a lengthy blog post about how such a wearable mobile device would work. Thanks to AppleInsider, we now know that Apple filed for a patent in August 2011 for what the rumor site describes as a “wearable accessory device that not only boasts a full-length flexible touchscreen display, but conforms to a user's body through the use of a ‘slap bracelet’ mechanism.” Apple’s patent filing describes how “with a touch screen user input a user can accomplish a number of different tasks including adjusting the order of a current playlist, and reviewing a list of recent phone calls. A response to a current text message can even be managed given a simple virtual keyboard configuration across the face of the flexible display.”

Apple vs. Samsung. The ongoing patent war between Apple and Samsung is getting to be even too much for the judge who has been presiding over the case. Judge Lucy Koh, who oversaw the battle over design patents between the two companies last year, said that both sides must limit their claims in another lawsuit set to go to trial in March 2014. “You’ve already been litigating this thing for a year…We’ll keep narrowing and narrowing,” Koh told lawyers from both sides as she asked them to limit their cases to 25 patent claims and 25 accused products, according to Bloomberg. The lawsuit, filed by Apple in February 2012, covers newer products including Samsung’s popular Galaxy S III smartphone and different patents than the ones covered in last summer’s trial. Samsung has filed a countersuit, naming products including the iPhone 5. You may remember that Apple was the victor last year when it was awarded $1.05 billion by a jury.

Hack attack. Apple, whose computers has had fewer security  admitted this week that it was targeted by hackers who compromised a “small number” of its employees’ computers though it said that it didn’t find any evidence of data theft.  Apple said it believed the hackers were the same group that Facebook announced last week had gained access to a number of its employees’ computers using an infected developer’s website that exploited a vulnerability in Java. Apple says the same trick was used to access its workers computers, my colleague Andy Greenberg reports. Apple has already issued an update to Java to prevent other such malware attacks. Apple, Facebook and Twitter, which also said it was similarly attacked, are working with law enforcement officials to identify the attackers. You can download the update and find out more about it here.

Weird. Apple board member Arthur Levinson, who became chairman in November 2011 after Steve Jobs’ death, had one word to describe what it’s been like at the company: weird. "I'm still not to the point where I walk into that boardroom and don't miss Steve," Levinson, speaking at an event hosted by the Stanford School of Business. "He was a one of a kind guy ... The Steve Jobs that was in the public eye was not, for the most part, the Steve Jobs that I knew." Levinson, former chairman of Genentech, has served on Apple’s board since 2000. He also said the board isn’t involved in product decisions. "The board is not there to define product specs," Levinson said, according to a report by Fortune. "It's there as a sounding board. It's there as a resource. And ultimately, the board is there to hire and fire the CEO."

Thinking outside the lunchbox. Apple’s design chief Jony Ive, in an interview on a popular British children’s show called Blue Peter, talks about how the company approaches design – and how it avoids labels and words that can limit creative thinking. When asked how he'd go about designing a lunchbox (at the 1:00 mark), here’s what Ive had to say: ““If we’re thinking of lunchbox, we’d be really careful about not having the word ‘box’ already give you a bunch of ideas that could be quite narrow. You think of a box as being a square, and like a cube. And so we’re quite careful with the words we use, because those can sort of determine the path that you go down.” Thanks to journalist Tom Davenport for finding the clip and posting the complete episode.

That’s it for this week. Enjoy the weekend.

Here's last week's Apple Loop in case you missed it:

Apple Loop: Cook, Cash and the 'Silly' Lawsuit, The iOS 6 Update Saga, iPhone Problem in Brazil