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• CNET reports that developers were telling Apple for months that its mapping data for the new iOS Maps wasn’t very good.
• Oops: AuthenTec, the company Apple purchased for $356 million a few months back, makes software that opens users of rival platform Windows to a security risk, Ars Technica reports.
• A big meeting today in Geneva meant to get big players like Apple, Motorola, Google and others to consider a route to patent peace didn’t make much progress, says ZDNet.
• Apple is growing its share of junior high and high school customers: 40 percent of teenagers have an iPhone. Meanwhile,  just under half of those surveyed own a tablet, and of those, 72 percent say it’s an iPad, according to a recent Piper Jaffray survey. (via AppleInsider)

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The deal for Apple to purchase AuthenTec for $356 million was disclosed quietly, through an SEC filing, on July 26. But the outright purchase of the company wasn’t the original plan, apparently. AuthenTec, a pioneer in biometric security that makes fingerprint sensors for mobile devices, had some new technology it was looking to sell to device makers. It approached several companies last year, but apparently Apple was the only one interested, according to the filing:

Late in 2011 and early in 2012, the Company [AuthenTec] discussed new technology with several leading consumer electronics companies to gauge potential market interest for such a product. For a number of reasons, including cost, Apple was the only potential customer that expressed substantive interest in pursuing further development of and a commercial agreement with respect to this technology.

Beginning late in February 2012, management of the Company, including Larry Ciaccia, Chief Executive Officer, Phil Calamia, Chief Financial Officer, and Fred Jorgenson, Vice President and General Counsel, met with representatives of Apple to discuss and negotiate the terms of a potential commercial agreement between the Company and Apple relating to the development of this new technology. These discussions continued through March and April 2012 in several meetings held at the offices of Apple in Cupertino, California, as well as telephonically.

Long story short, there was a lot of back-and-forth between Apple and AuthenTec over licensing, exclusivity, cost and other details about this new product Apple wanted to use. Then suddenly on May 1, Apple said, “what the heck, we’ll just buy the whole company instead of this one technology” (that’s a paraphrase) and offered $7 per share. Apple played hard ball too: it said if Apple couldn’t buy the company, it would also no longer be interested in the “new technology” the two were working on.

There were some other hiccups over that next month — Apple found something in the due diligence process it didn’t like — and eventually said it would rather go back to partnering on a product than buying AuthenTec. That was the beginning of June. And for the next month the product development continued.

Eventually AuthenTec resolved the due diligence matter and Apple changed its mind (again) and said it would like to acquire AuthenTec after all and the deal was done by the last week of July. The merger hasn’t been voted on by AuthenTec shareholders yet.

What’s the mystery product?

What Passbook looks like in iOS 6.

Far more interesting than the tedious negotiations of the two companies is what exactly the two were, and are, working on. As I wrote back when the deal was announced, it could have something to do with secure mobile transactions — those could include monetary payments or other personal info people want to secure, like tickets and corporate rewards cards. AuthenTec makes fingerprint sensors, but specifically, it makes a chip that secure NFC transactions.

Passbook, which is a new feature of iOS 6 that will be available likely in the next month or so, lets users keep boarding passes, tickets, coupons and rewards cards in one app. None of those allow direct access to a user’s debit or credit cards, but they can be used to make payments via stored-value cards like the kind Starbucks issues.

What this SEC filing reveals is that the two companies weren’t starting from scratch on a new product at the end of July. If they were, it would be extremely unlikely that there would be any product of their collaboration ready in time for a fall product launch. However, if this is something AuthenTec had been shopping around for the last year, then it’s extremely plausible that this fingerprint sensor, could be ready in time for a next-generation iPhone purportedly launching in a month, or a smaller iPad, also expected before the end of the year.

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• When an Apple designer was called as a witness in the Samsung-Apple trial yesterday, he unveiled several dozen iPhone and iPad protoypes that Apple had used in its product design process. You can check out all the images at The Verge.
• One of the designers of Apple’s custom chips used in the iPhone, iPad and Apple TV, is leaving the company. Jim Keller is joining AMD, where he’ll work under CTO Mark Papermaster — you may remember his short-lived stint as Apple’s SVP of hardware engineering from 2009 to 2010. (Via Appleinsider.)
• Samsung brought images of early iPhone prototypes to the media’s attention yesterday, even after they were not allowed to be submitted as evidence in the ongoing trial. Today, Samsung’s attorney was forced to defend the company’s actions to the judge, according to a report from CNET. For the record, the attorney says it didn’t violate a court order or any ethical practice.
• The New York Times has a great explanation of the extra steps Apple took to secure its plan to purchase AuthenTec, which was very quietly filed with the SEC last week. We know Apple is secretive, but the fine print of the acquisition shows the precautions Apple takes to keep its business secret, and to keep other companies from trying to outbid it when it has a target in mind.
• There are some rumblings that Apple might be considering a stock split in order to be added to the Dow Jones Industrial Average. Forbes weighs in on what that would mean for Apple, its investors, and for the DJIA.

Apple ranks No. 5 in the PaidContent 50, the list of the world’s most successful media brands. Be sure to check out the full list for how Apple and the other 49 make their money in digital media.

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Passbook

Passbook is not — as of now — a true payments system. And it isn’t available just yet because it’s coming with the iOS 6 update this fall. At least for me, it’s one of the most exciting new features of the software. It’ll keep already purchased digital train, subway and plane tickets in one app on your phone for scanning, and it will also hold payment and rewards cards as well — like a Starbucks or Target rewards cards. It basically approximates the part of your real-life wallet that doesn’t include cash or credit cards.

Now, if you have an iPhone, you can already use digital rewards card apps or payment apps, like LevelUp, which use barcodes for transactions. But having creating a distinct app for rewards and loyalty cards, it’s not hard to imagine that Apple will use Passbook as a way to gather feedback about how comfortable people feel with some wallet-like functionality in their iPhone. It could just be a convenience feature — or it could be a way to train customers for something coming next.

iTunes

Right now, iTunes is a global marketplace where Apple sells digital goods: music, movies, TV shows, ebooks, apps, games, and newspaper and magazine subscriptions. And to have an account, and enable quick and easy payment (just click to buy and enter your Apple ID password) you have to have a credit card hooked up to it. As a result, Apple already has more than 400 million credit cards on file, perhaps the most of any one company.

ITunes payments are actually not limited to digital goods. You can already use your iPhone to buy physical items: if you have the Apple Store app on your device, you can walk into an Apple Store, and with the Easy Pay feature you can scan the item, enter your password to authenticate the charge to your iTunes account, and you can leave the store with your new earbuds or iPhone case without even talking to a salesperson. Right now, the system only works for items under a certain dollar amount.

Security

AuthenTec chip

NFC, or near-field communication, is a technology that enables contactless payments and other actions like  mobile marketing, digital rewards cards and loyalty points. It is already being used in some smartphones for payment transactions with apps like Google Wallet. When you have your credit cards or personal information connected with a mobile device, security is critical. And that’s where AuthenTec potentially enters Apple’s plans.

One of the company’s key products is an NFC chip with on-chip encryption, which is designed specifically for mobile payments. And in keeping with Apple’s penchant for a seamless, touch-oriented user experience, AuthenTec’s expertise is biometric security. The chip requires just a finger swipe to authenticate a transaction — the idea being that a person’s unique fingerprint is even more secure than a password.

To be clear, chips for mobile payments are not the only thing AuthenTec makes — and it’s entirely possible that Apple snagged this company just so it stays out of the hands of a competitor like Google or Amazon. But AuthenTec is considered a leader in the secure mobile payments field.

The missing pieces

As far as expertise with NFC technology goes, Apple already hired at least one high-profile employee from NFC chip factory NXP. Since then, it has been rumored to be testing the technology on iPhones. (Though I wouldn’t hold your breath waiting for the next version of the iPhone to have NFC capabilities.)

While the signs point to the possibility that Apple is aligning elements of a payment system, the biggest question mark is the actual payment processing. With iTunes, Apple runs one of the largest electronic storefronts on the planet, but paying for stuff in the real world is different — Apple would have to help its customers buy stuff from companies other than itself. To do that, Apple would most likely need to strike deals or partner with credit card companies, payment processors and the makers of point-of-sale terminals that enable contact-less transactions at brick-and-mortar stores.

It’s true that NFC is not new. The technology has been around for years and it has remained on the margins (some would say it’s been far too overhyped, in fact). But that’s often Apple’s sweet spot — the company is almost never the first to use a technology, but it’s really good at figuring out how to make something really easy to use and popularizing it. And for a technology in need of a huge boost, Apple implementing it, as my colleague Ryan Kim wrote recently, would easily make that happen.

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According to Reuters, Apple paid a premium of about 58 percent for the Melbourne, Fla.-based company, or about $8 per share.

So what is AuthenTec? Even if you’ve never heard of the company, many of Apple’s competitors — who are AuthenTec customers and partners — have.

AuthenTec makes fingerprint sensors that can authenticate access to mobile devices and PCs. The company says 100 million of its sensors have already been shipped and they’re in more than 20 million phones. It counts HP, LG, Motorola (now owned by Google), Nokia and Samsung as just a few of its customers.

As for why Apple would be interested in such a company, well, mobile security is obviously important. Apple may be eyeing fingerprint-based authentication for iPhones and MacBooks. Or maybe it’s interested in AuthenTec’s NFC-payment security technology for a future iPhone with mobile payment capabilities? Another asset AuthenTec has is a patent portfolio — it has 200 technology patents that are “foundational” to fingerprint biometrics.

A $356 million purchase is certainly small for a company as rich as Apple (it has $117 billion in the bank) but it falls in line with the company’s history of purchasing smaller firms. Most of Apple’s acquisitions tend to be software-based. But it’s been thinking hardware in recent months: At the end of 2011, it bought Israel-based flash memory maker Anobit. Along with earlier hardware acquisitions – it bought Intrinsity, which works on designing chips to run faster, in 2010; and in 2008 it acquired P.A. Semi, the company brought in to design Apple’s custom iPhone and iPad chips — Anobit and AuthenTec fit with Apple’s belief in controlling as many aspects of its products as possible, from the operating system down to the chips.

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