Samsung vs. Apple Verdict: The Winners and the Losers
Ashish is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In one of our previous articles, we talked about the Apple (NASDAQ: AAPL) vs. Samsung infringement battle and how Apple has had the upper hand in the trial (See: The Apple-Samsung Battle and its effects on the Smartphone industry). As we expected Apple has finally won the infringement battle with the jury authorizing almost all of Apple’s claims against Samsung, handing the South Korean electronics giant a bill of $1.049 billion. With the verdict of the Apple vs. Samsung patent lawsuit fallen clearly on Apple’s side, we will be looking for the hearing on preliminary injunctions, which could result in a sales ban for the infringing Samsung devices. According to reports from the Verge the hearing will take place on Sept. 20 after Apple submits its requests by Aug. 29, giving Samsung two weeks to respond.
We believe that Apple’s victory will have huge implications for the $30 billion smartphone industry. It has been clear from the start that Apple has been attacking Google (NASDAQ: GOOG) rather than Samsung through this trial. This Apple victory will potentially have a significant impact on the future revenues and ROI that Google derives from Android. We believe that the victory will raise questions about the ingenuity of Android devices and will persuade Apple to file an increased number of IP litigations, perpetually slowing the momentum of the Android ecosystem. We believe that Android ecosystem will face a headwind as it will be forced to remove or change features, which might result in bad user experience.
Apart from that there is an increased risk of challenging Android economics for device manufacturers like HTC with the high licensing costs from Apple. The Apple victory will also negatively affect Motorola Mobility (NYSE: MMI), the hardware division that Google acquired for $12.5 billion, which might see huge pressure on operating margins with the licensing costs from Apple.
While some believe that the verdict will result in a loss for the users as the licensing cost will be passed on to the consumers by the OEMs, we believe that the decision was made with the right conscience and might result in a long-term positive from the consumers' perspective as companies like Google and Samsung spend more on their R&D departments and come up with more innovative products. Google has done so in the past and we believe that it can do so again.
We believe that apart from Apple, this step will clearly benefit Microsoft (NASDAQ: MSFT) and maybe RIMM (NASDAQ: BBRY), which are neither using the same form factors nor the same design as Apple. As Microsoft and Nokia (NASDAQ:NOK) are expected to come with Windows mobile phone while RIMM is expected to launch BB 10, we believe that a possible scarcity of Android phones in the market or higher prices of the Android phones past the verdict could result in deeper penetration levels for these OEMs.
Going forward, we believe that this verdict will have a positive effect for Apple, Microsoft and Windows OEMs, while it will negatively impact Samsung, Google and Android OEMs. With this win, we see Apple going for plenty of litigation in the future that might further pressurize the Android ecosystem. With the verdict favoring Apple, we continue to believe that Apple can trade at much higher valuation and hence rate it as a buy.
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