Windows Phone's Time to Shine
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
After just twenty two hours of deliberation, on what experts predicted would take at least a week, the jury in the Apple (NASDAQ: AAPL) v. Samsung patent infringement case handed Apple a decisive victory. Not only did they find that Samsung infringed on most of the intellectual property of Apple, Apple alleges they also found that Apple did not infringe on Samsung’s intellectual property. Along with this ruling the jury awarded Apple just over one billion dollars in damages and it is possible that Judge Koh could add more to that amount (She has the right to triple the damages found by the jury should she chose to, although that is highly unlikely). This came a day after a Korean panel of three Judges found that both Apple and Samsung infringed on each other’s patents.
Beyond the short term negative financial impact this ruling has on Samsung, and the positive one it has on Apple, this will have an impact on the wider smartphone market. Samsung recently upset Nokia (NYSE: NOK) as the largest maker of phones worldwide, a title that Nokia held for over a decade. Though some of Samsung’s early success may have been because they copied Apple, most of their success has come from their excellent hardware coupled with Google’s (NASDAQ: GOOG) Android operating system. It is the Android operating system that may be the largest loser in the recent ruling. Even though Google stated that the ruling mostly doesn’t “relate to core Android”, the largest patent award ever was just extracted from a major Android partner. This does not bode well for the dozens of other lawsuits Apple has pending against smaller Android partners. Eventually this legal battle will end with Google and Apple facing off in a court battle as Google recently did with Oracle (Google won that case). In fact there are cases pending between Motorola and Apple and Motorola is owned by Google.
Apple is attempting to ban eight of the almost two dozen Samsung devices they just won patent violations against. While most of these devices are dated Apple has a second lawsuit that will get under way next year attempting to render judgments against the Galaxy SIII and Galaxy Nexus, Samsung’s current flagship devices. Whether or not Apple gets these or future Samsung devices banned from the US, or other markets, the continuing legal quagmire that Android is struggling its way through demonstrates one of its weaknesses. Samsung has the cash and the design team in place to innovate around the patent issues they are running into, and Google has consistently built Android into a visibly differentiated operating system from Apple’s iOS. However some of the smaller and struggling Android handset makers like HTC or even Sony may look to other mobile operating systems that provide greater legal protection.
Building an in house mobile operating system would be impossible at this time. It would be costly and would be years behind the competition not to mention the possibility of running into its own legal stumbling blocks. However there is another option, they could use the soon to launch Windows Phone 8 operating system from Microsoft (NASDAQ: MSFT).
We are expecting Nokia to launch the first Windows Phone 8 devices within a month. Even though Nokia is Microsoft’s premier Windows Phone partner Microsoft has been shopping around for other hardware partners. Windows Phone has had none of the legal issues that Android has; in fact Microsoft is currently receiving royalties from 70% of Android handset makers over intellectual property Android allegedly infringes on. One estimate from Goldman Sachs has Microsoft making up to 444 million dollars from Android royalties this year. Even Apple announced a licensing deal with Nokia in 2011 over wireless technology developed by Nokia that Apple was using without permission.
Windows Phone 8 is brining Windows Phone up to par with other mobile operating systems. Even surpassing them in terms of integration with Windows 8 and Microsoft services, Windows Phone 8 will prove a more attractive platform than ever. If an Android handset maker is paying Microsoft royalty’s and paying their legal team to defend Android phones while facing potential billion dollar damages and sales bans, alongside ever increasing competition within Android; Windows Phone 8 will provide them with excellent diversification.
Even if Android makers like HTC, Sony and LG do not jump into the Windows Phone camp the competitive landscape for Windows Phone 8 and Nokia just got a little brighter. Any Samsung devices that get pulled from the US market will be older and thus cheaper devices. Nokia has had an aggressive pricing strategy for their Lumia Windows Phones and with less competition in the cheaper smartphone market because of Samsung sales bans, should they come to pass, more Lumia phones will be sold. Additionally with the court case mainly focusing on Touch Wiz phones (as opposed to Google experience phones), the skin Samsung puts over stock Android Samsung may have to alter Touch Wiz on current devices. Especially as the second Apple lawsuit dealing with current generation phones kicks off. This could stunt Samsung’s rise in the smartphone world, at least for a time. With HTC already faltering, Sony phones failing to take off, Blackberry in a steady decline, Motorola on life support even after Google purchased them, for the first time in a while Nokia does not look like the worst phone company out there.
Windows Phone barely registers on surveys of smartphone usage and Nokia is still selling more non-windows based smartphones than Lumia phones so it doesn’t take much to qualify as good news. With Windows Phone 8 set to launch in the next month, more hardware partners coming online and a crack, albeit a small one, finally showing in Android’s armor it could be Windows Phones time to shine.
ded004 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Nokia. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.