Apple Lawsuits Can’t Stop Android
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The entire time I was watching The Social Network, I wanted to shout at the TV, “your idea inspired Zuckerberg to make something better than you ever imagined!” Apple’s patent infringement lawsuit against Samsung’s (PINK: SSNLF) older smartphone models may have been focused on rounded rectangles and rubber band effects, but the real target of the suit was the Android operating system that is quickly changing the rules of a game they invented.
There is no doubt that Apple (NASDAQ: AAPL) makes amazing products but, like the Winklevosses, they are watching Google’s (NASDAQ: GOOG) Android platform take mobile computing places that they never dreamed of. The “freemium” based business model is quickly gaining ground on iOS. Android is already the most common platform for mobile devices worldwide. Although Google’s revenues from app sales are far behind Apple’s, I have no doubt that profits from advertising, in app payments and other streams, have a long way to rise before leveling off. Apple’s iOS on the other hand is limited to people that can afford a five hundred dollar phone.
Anticipation of the iPhone 5’s release helped Apple’s price gain over 20% over the month of August. News of a jury awarding the consumer electronics giant over a billion dollars from Samsung caused the price to jump, but by Friday those gains were all but wiped out. In the short term I would recommend holding on to Apple if you have it already. I suggest waiting to see how the highly anticipated, upcoming iPhone 5 release pans out. In the wake of the recent run up and the demise of visionary Steve Jobs, anything but unanimous praise for the iPhone 5 will result in Apple’s stock taking a deep hit. They’ve hit the mark 4 times in a row though, betting against them making a 5th seems awfully foolish.
With regards to Samsung, settlements, even record breaking ones, are a drop in the bucket compared to this high tech behemoth’s enormous revenues. Only a sales ban in the US on recent devices is going to significantly hurt Samsung’s bottom line, and you know that any court ruling banning the sale of, for example the S3, will be held up by appeals long enough to release an S4 or something more spectacular. Like it or not Apple’s competition in the smartphone market is here to stay.
Last week, Samsung beat Nokia (NYSE: NOK) to the punch by unveiling a new Windows 8 phone ahead of Nokia. Although Nokia is supposed to be partnered with Microsoft (NASDAQ: MSFT) to produce the first Windows 8 smartphones, it seems Samsung has their finger deeper in this pie than Nokia expected. Should Samsung lose market share in the smartphone market because of legal disputes, they are still poised to become one of the leading producers of devices running the highly anticipated Windows 8 mobile operating system. I would consider an unfavorable verdict against Samsung a minor road bump and an opportunity to buy in at a discount.
There are two important factors working together that make Google very attractive for the long term, especially in the smartphone and tablet markets. First, Google Play announced last month that they have amassed 20 billion app downloads compared to Apple’s 30 billion. It is, at the moment, the most popular mobile platform and shows no signs of slowing down. Second, in emerging markets like China, budget smartphones are quickly gaining market share and we all know that none of them run iOS. This means that the fastest growing segment of new smartphone users are nearly all having their first smartphone experiences with Andriod. Unless the big secret about the iPhone 5s is a sub $200 price tag, Android will continue to outpace iOS in number of users.
Even if all of Apple’s international patent disputes against Samsung go horribly wrong for the Korean Chaebol, I believe Google is going to come out on top in the long run. After all, Samsung isn’t the only company making devices that run on Android. Emboldened by their recent win, Apple will probably go after Taiwanese smartphone manufacturer HTC with more force. Luckily for Google, budget smartphone and tablet makers are like corner drug dealers, taking one out only makes room for another to take its place. Yesterday, I nearly bought a 7” tablet running Ice Cream Sandwich from a manufacturer that I never heard of for $90.
In case you’re worried about Android’s reach getting cut down by further litigation from Apple, I say relax. Patent acquisitions from IBM (NYSE: IBM) and the purchase of Motorola Mobility leave Google well prepared to launch powerful patent suit counterstrikes. I strongly doubt that Apple would dare to move forward against anyone holding that much cash and legal ammunition. Overall, I think the safest way to play the Apple Vs. Samsung Patent infringement case is to buy into Google.
muhammadbazil owns shares of Google. The Motley Fool owns shares of Apple, Google, International Business Machines, 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.