Apple's patent victory over Samsung: What the analysts say

Apple's patent victory over Samsung: What the analysts say

Summary: Here's a look at what analysts are saying about Apple's patent lawsuit victory over Samsung. Reactions vary widely.

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Apple's patent lawsuit win over Samsung drew a mixed reaction ranging from "an important symbolic victory" to "far reaching implications" to "unlikely to meaningfully change the smartphone landscape."

A jury on Friday handed Apple $1.05 billion in damages and found that Samsung willfully infringed on its rivals patents. Apple will now seek injunctions on Samsung products. Samsung will appeal.

Although the Apple lawsuit focused on Samsung it was really about Android. It's unclear why Apple hasn't sued Google directly, but to truly revolve the patent issues with iOS and Android the two parties should lock and load their lawsuits.

Here's a look at what analysts are saying about the lawsuit and my take.

Piper Jaffray analyst Gene Munster, the most bullish analyst on Apple, didn't go put much weight on the patent victory. He said:

We believe that Samsung is likely to make software modifications to devices to work around the patented software features in question. For devices that infringe on design patents, we believe those devices may no longer be sold in the US; however, it does not appear that newer devices, including the Galaxy SIII are impacted. Net-net, we do not believe Samsung will see any meaningful interruption, likely only minor interruption, in device sales in the US... We believe that it is likely that other lawsuits between Apple and other handset makers move toward a settlement, given the precedent of the Samsung case. In these cases, we note that software changes are the most likely competitive outcome (aside from monetary exchanges). We do not believe further settlements are likely to hamstring Android in any serious way.

My take: Munster is dead-on. Unless the Galaxy S3 is hit, the patent loss to Samsung is manageable. Android will continue its March unless Apple finds a way to stop it in emerging markets like China.

More ZDNet: Asian consumers worry about innovation in Apple-Samsung aftermath | Apple victory aftermath: Samsung stock slips and experts question jury speed | A lesson in innovation from Apple's first interface trial | Samsung's Apple patent loss: The financial hit is manageable | Will Nokia and Microsoft be the winners after Apple - Samsung verdict? |  With Samsung spanked, could Google be next? | Samsung / Apple verdict: The aftermath | The real winner in Samsung vs. Apple: Microsoft? | The verdict is in: Samsung vs. Apple | Apple vs. Samsung verdict: It doesn't matter | Apple v. Samsung verdict: What it means

Morgan Stanley analyst Katy Huberty was convinced the patent lawsuit would boost Apple iPhone market share. She said:

The $1.05 billion in damages the jury awarded Apple is relatively insignificant compared to Apple's nearly $120 billion of cash and investments. In our view, the bigger win for Apple is the competitive ramifications if other smartphone vendors experience lengthened product cycles and are forced to alter their software and hardware to ensure unique designs relative to Apple products.

My take: Huberty is stretching. Apple's product cadence for the iPhone is simple: Once a year. It's highly unlikely that Android device makers---even if they need software tweaks---are going to release devices at a clip slower than Apple.

Barclays analyst Ben Reitzes said that the value of the verdict isn't really quantifiable Apple doesn't need to put Samsung and the Android army out of business. Reitzes said:

While we realize the verdict will be appealed, we believe the ruling marks an important victory for Apple against Android. Competitors may now think twice about how they compete in smart mobility devices with the industry’s clear innovator. If Apple forces competitors to innovate more, it could take longer for competitive products to come to market, and make it more expensive to develop them. As a result, Apple’s pricing umbrella could be sustained longer while it should also sell more units over time.

The outcome of these lawsuits impacts the 659 million unit smartphone market. As for the tablet market, the total market opportunity is 112 million units in 2012E. For example, if Apple can sell an incremental 10 million more iPads and 20 million more iPhones at current prices – helped by its ability to slow down competition, it would add $17-18 billion in revenue or $5-$6 in EPS creating $65-$80 of shareholder value per share (applying just a market multiple).

My take: Reitzes' best move was putting some dollar figures to his take. Apple's victory isn't zero sum and doesn't have to be for the company to rake in lots of dough.

CNET: Apple v. Samsung: Juror says both sides' lawyers were persuasive | Exclusive: Apple-Samsung juror speaks out | Top evidence according to juror (pictures) | Full coverage: Apple v. Samsung

William Blair analyst Anil Doradla took a nuanced view about Android and developers. He noted that Samsung's size couldn't be ignored by Apple and added:

While Samsung’s case is not related to Android or Google, it nevertheless will be viewed incrementally negative for them. As HTC’s recent litigation has proved, Google cannot guarantee protection to its Android ecosystem against Apple. Bottom line, we believe handset vendors are thinking twice about embracing the Android ecosystem.

My take: Litigation is nice, but developers---not lawyers---will ultimately decide whether Android stumbles or keeps moving forward.

Stifel Nicolaus analyst Aaron Rakers said that Samsung is likely to settle Apple patent claims going forward.

Since Samsung was found to be willfully infringing Apple's patents, we believe Samsung is more likely to begin constructive patent licensing negotiations with Apple. Assuming that Apple can more confidently demand the $30 per smartphone and $40 per tablet they initially outlined, this could add around $8bn and $7-$8 to Apple's revenue and EPS in FY13, respectively. Although Samsung has responded by suggesting that a win for Apple would result in fewer options and higher prices for consumers, we think Apple has worked diligently to make its smartphones and tablets more affordable by offering previous generation devices at reduced prices

My take: A global patent settlement with Apple seems increasingly likely now.

KDB Daewoo Securities analyst James Song said that Samsung can take the hit. He said:

We believe that Samsung's second half smartphone lineup is superior to Apple's. While Samsung's lineup (e.g., the Galaxy S III (4.8‰ screen), Galaxy Note II (5.5‰)) will be diverse, Apple is likely to depend only on the iPhone 5. Furthermore, along with Samsung's hardware improvements (e.g., adoption of plastic substrate-based display), major upgrades in Android 4.1 (e.g., smoother user interface, voice recognition) should be noteworthy.

My take: Time will tell. It's worth noting that the reaction from Asia's analysts are materially different than those industry watchers in the U.S.

Daiwa Capital Markets analyst Jae Lee said that Samsung's product cadence means an injunction has a limited impact.

Given the relatively short life cycle of Samsung’s smartphones, we think any injunction would have a limited impact. Although the US accounts for 15-20% of Samsung's smartphone sales, Samsung’s flagship models in the US are currently the Galaxy S III and Galaxy Note, which look different to their predecessors and incorporate different technologies that do not infringe on some of Apple’s patents.

My take: There's something to Lee's argument. Can the Galaxy S4 be all that far behind?

Topics: Mobility, Android, Apple, Legal, Samsung

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78 comments
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  • Well the Note will be safe

    I think its the anti-patent device... whatever Jobs said a phone SHOULDN'T be, they used it as a basis for the design!
    paulhknight
    • Anyway, analysts are as averagely informed and clueless as anyone

      No point in paying attention to what they write in their notes. Their "conclusions" usually are totally random.
      DDERSSS
  • Some softwarepatenss not so easy to get around

    The Morgan Stanley analist is wrong.

    Killing both pinch to zoom and double tap to zoom will make a lot of android users anoyed.
    and I expect Apple to go after the flagship Galaxy SIII and Note with this verdict as well.

    They will ask for an injuction on those newest phones as wel and given that they have this verdict in hand they can easily get an temporary injunction also for those new phone models as well as the newest models clearly also do use pinch-to-zoom and double-tab-to-zoom in for instance the browser. They just were not in cluded in this longer trial but a injunction can be gotten quickly.

    And android still has issues with Microsoft patents as well with either paying a license to Microsoft or looking to lose more litigation (Motorola).
    IE9
    • These aren't software patents

      They are mobile phone/device patents (and associated design patents / registered designs). Europe doesn't have software patents, so you would not be seeing a fight in Europe if that's what these are.
      ThinkBeforeTyping
      • Softwarepatents do exist in Europe

        It is a myth that software patents do not exist in Europe.

        Actually the ' bounce' patent used in Samsung touchwiz software in this trial was also used and validated by the courts in the Netherlands and the UK where in the Netherlands Samsung has adjusted the software of its phones and tablets (in the UK HTC was not using the ' bounce' effect in it's android phones).
        IE9
  • Propaganda by the 'analysts'

    These 'analysts' can spin this off in which ever way they want and probably will be payed by google to make it look un-scratched.

    But the reality is that most android OEM's will take a harder look about the future of android. Most OEMs' pays a royality to MS and now some may be forced to pay to other players as well.
    owllnet
    • And you

      get paid by noone, just a fan, just an Apple troll.
      eulampius
  • Innovate

    If there's a common thread running through these, it's that innovation will be enhanced by the fact that the competitors now have to think up their own designs and features instead of playing "me too" with whatever sells. That is precisely the result that the patent system is supposed to produce.

    I've never understood the people cheering for a kind of competition that consists of making the same thing over and over again at ever-lower margins. Nobody likes how that turned out in the PC business; people are calling the hardware OEMs 'tired old slugs' and insisting that Microsoft had to kick them in the butt with Surface to get them to have a new idea.

    What we'll find out in the next year or two is that Samsung and others are perfectly capable of innovating, and that we like some of their innovations. Those are things we were not going to get so long as it was easier to be lazy.
    Robert Hahn
    • Innovation

      is is what the crooked patent system all about? Yes, usually patents are granted to the inventors, not those who first thought of getting it. Patents are ridiculous in IT though. Apple wouldn't be able to even raise its f**king head, were FreeBSD, GNU tools and gnu bash be patented as ideas.

      Samsung F700 was released a month before the first ever iPhone. F700 had this peculiar shape, so there is noway it could be patented by Apple. There is a way in the US though. The patent office leisurely gave it to Apple. They can give it to anyone for anything (be it rectangle with or without rounded corners). No surprise, why this sick-minded accusation had had no chance in any other than this strange country. The British judge made sure everyone realizes how farcical these allegations were

      Appeal? We will see if the US can demonstrate something different from the usual incompetent idiocy it is well known for.
      eulampius
      • So many errors, so little time.

        That you brought up the F700 (like clueless people that bring up the LG Prada) shows you have no idea what this suit was about.
        Bruizer
    • Common thread?

      "If there's a common thread running through these"

      You mean a common script. Come now Mr. Hahn, if you can latch on to the term "Fast and Fluid" being proof of MS scripts on ZDNet, it makes absolute sense that latching onto the "this will enhance innovation", which IS the official script from Apple, proves that people like you are employed by Apple to read scripts written in Cupertino.

      There was a ton of innovation in this market before the verdict. WP7/WP8, WebOS, PlayBook, Kindle Fire, all of these vastly different from anything Apple was putting out, all of these either dead or dying, thanks in large part to scripts being read by people like you. Innovation was happening all the time but the 1,000lb gorilla from Cupertino was able to erect so many barriers to entry that no one was allowed to compete. One only needs to look at Apple's monopoly profit share to see proof of this.

      Innovation was happening before this verdict. This verdict will not "create" innovation. This whole script is based on the lie that there was no innovation before. We see through it. We reject this script of yours. This trial was about one thing and one thing only: eliminating the competition. Apple's official party line, being parrotted by you and all your peers, is a marketing lie.
      toddbottom3
      • Fer sure

        Yes, Toddy, each of the securities analysts quoted in the article saying things like 'ensure unique designs,' 'forcing competitors to innovate more' and the like are all reading from a script written in Cupertino because, like owllnet says, they are all taking money on the side from Apple to be propagandists.

        Unlike you and owllnet.
        Robert Hahn
        • I'm just highlighting your lack of consistency

          There are a lot of people broadcasting the same message Mr. Hahn. When you disagree with that message because it isn't anti-MS, you say this is proof of MS scripts. When you agree with the message because it is pro-Apple, suddenly the level of proof changes and they can't possibly all be reading from a script.

          And no, there are not a lot of security analysts are saying the same thing. The ones that have always had a pro-Apple agenda are the only ones parrotting the official Apple party line. The rest are saying this will REDUCE innovation. So is it possible that EACH of the securities analysts quoted in the article are reading from a Cupertino script? Yup. I would say it is even likely.
          toddbottom3
          • The mighty jaws of the Pit Yorkie strike again

            N/T
            Robert Hahn
          • yip! yip! yip!

            Cylon Centurion
          • shut

            up.please and go back to playing video games.let the grownups talk
            sarai1313@...
    • "competitors now have to think up their own designs"

      If that's true, then why has Apple copied so many features that Android already had?

      *installable apps--the first IPhone had no App Store
      * copy/paste
      * multitasking (which Apple still hasn't quite figured out)
      * modeless notifications
      ldo17
      • Ultimately, you have to give Apple credit here

        The combination of their marketing department and their legal department are absolutely annihilating the competition. Everything you have been saying is right on, simple, and makes total sense. It isn't complicated. However, you are going against a multi-billion corporation that has marketed the message that only Apple innovates. You are going against a multi-billion corporation that has convinced a judge to exclude all prior art.

        Apple deserves an incredible amount of credit here. At no point in history have we ever been closer to the ideals as laid out in 1984. Apple is it.
        toddbottom3
        • “... are absolutely annihilating the competition. ”

          Except they’re not. Apple have had falling Iphone sales the last two quarters. Lots of companies are raking it in with Android devices. Even Samsung’s best-selling device, the Galaxy SIII, has been untouched by this stupid lawsuit. So Apple really are in a tough spot--everybody's expecting them to completely outdo themselves with the Iphone 5, but the indications are it simply won't be "magical" or "revolutionary" enough to sell well for more than a couple of quarters.
          ldo17
          • I wish it were true

            "Lots of companies are raking it in with Android devices."

            This simply isn't true. Samsung and Apple are the only 2 companies that make any appreciable profit in this market.

            "the Galaxy SIII, has been untouched by this stupid lawsuit"

            Apple has already asked for the ban, and will get it.

            "the indications are it simply won't be "magical" or "revolutionary" enough to sell well for more than a couple of quarters"

            This is why it is SO important that Apple use alternate methods of keeping their sales up. They can't innovate so they are forced to litigate. If they can remove our choice of phones, they can keep their sales up without putting in any effort. I call the iPhone 4S and the new iPad the iPhone IE6 and the iPad IE6: monopoly products that prove the company behind them have gotten lazy.

            Apple will continue to win, that is undeniable. Consumers will continue to lose but we are to blame, we've asked for it, and a jury (foreman) of our peers has ensured it.
            toddbottom3