Can Samsung’s Pain be Nokia’s Gain?
Keki is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
On August 24, a federal jury gave Apple (NASDAQ: AAPL) more than $1 billion from Korean electronics giant Samsung, as it infringed on six different mobile device patents. But that’s not all... Apple is now seeking a ban on many of Samsung’s smartphones in the United States, including the recently launched Galaxy SIII.
I can only imagine Steve Jobs smiling in heaven right now over Apple’s “Thermonuclear” victory against Samsung. But apparently, Good ol’ Stevie may not be the only one smiling.
There has been a lot of buzz in the blogosphere and the news about Apple’s victory being beneficial to other smartphone players, especially Nokia (NYSE: NOK). Because any dent in Samsung’s market share would give an opportunity to other manufacturers to increase their own share of the smartphone pie.
So is this really the case? Let’s dig a little deeper...
There is no doubt that Apple’s victory against Samsung will have an industry wide impact. But, at the same time, smartphone makers who use Google’s (NASDAQ: GOOG) Android operating system could possibly turn into Apple’s next target. At present, Apple is seeking a ban on at least 8 Samsung devices. And if successful, this would definitely encourage the company to legally chase other Android device makers.
On the flip side, non-Android smartphone makers, now find themselves in a rather enviable position. Not only are they clear of Apple’s legal bazooka, but a ban on some of Samsung’s smartphones would give them an opportunity to expand their market share.
So this also makes Nokia a winner, right...? Well, it ain’t that simple buddy!
Run for your lives!!!
Once smartphone makers feel threatened due to their association with Android, many of them would probably migrate to a different platform. And there are no prizes for guessing that Microsoft’s (NASDAQ: MSFT) Windows will be the most likely alternative. How is that so?
Well, sitting under Microsoft’s umbrella will provide smartphone makers with much needed legal protection from Apple since good ol’ Softy has cross-licensing agreements with the Cupertino based company. Hence the two won’t be stupid enough to sue each other.
Moreover, in the past, Microsoft has triumphed over patent disputes with Motorola Mobility (now part of Google) and has managed to ban imports of its Android devices. So given Microsoft’s legal edge, smartphone makers would obviously be tempted to jump onto the Windows bandwagon.
So now what happens to Nokia?
Well, if more smartphone makers consider adopting Windows, Nokia would suddenly find itself battling a larger crowd of more direct competitors who would churn out similar devices.
But even so, I still feel that Nokia stands to gain from Apple’s victory, since a blow to Android device makers would offer a temporary, but golden opportunity to gain traction in the market through its upcoming Windows 8 Lumia devices.
In addition, with Android devices on the firing line, wireless carriers such as Verizon and AT&T would find it more convenient to favor Windows phones especially Nokia’s range of Lumia smartphones. These devices would always stay clear of any legal dispute with Apple due to Nokia’s snug relationship with MS. Consequently, any increase in sales for Nokia would definitely hasten its ongoing turnaround.
But the positives for Nokia don’t end there...
Nokia is sitting on a rather large cache of 30,000 patents it acquired over the past 20 or so years. Some analysts believe that these could be worth between 4 to 10 billion euros. But after Apple’s patent victory, I suspect that the value these patents would be much higher today than it was before. This should not only ensure a higher “floor price” for Nokia’s ADRs but would also potentially serve as a good source of more royalties for Nokia.
The Foolish Bottom line
Many people, including me, thought that Nokia made a mistake of not adopting the Android platform. Today, the company’s ostensibly stupid move seems vindicated and has probably saved it from a lot of legal hassles too. During court proceedings, Apple used Nokia’s Lumia phone as an example of a smartphone that does not infringe on its copyrights. I feel that this certainly bodes well for Nokia as it releases its all new Windows 8 based Lumia phones shortly.
But having said that, it’s not going to be a very easy ride for Nokia. The company still needs to work very hard to increase its market share and bring its bottom-line out of the red. If other smartphone makers increasingly adopt the Windows platform, Nokia would have to work even harder to attract the attention of consumers.
So what do you guys think of Nokia's supposedly favorable position after the Apple patent ruling? Feel free to express yourself in the comments section below.
kekidf 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.