Samsung's Apple patent loss: The financial hit is manageable

Samsung has been hit with a stinging patent lawsuit defeat at the hands of Apple, but assuming the electronics giant can keep its Galaxy S3 and Galaxy Note away from an injunction the financial hit is minimal.

In other words, the fact a jury ruled that Samsung must pay at least $1.05 billion in damages to Apple for infringing on three design patents isn't the hit it's portrayed to be. Even if Apple's gets three times that amount in damages---something that is possible---Samsung has a few things going for it. A hearing Sept. 20 on whether Samsung's 25 models should be banned from the U.S. is the next key item in this patent scrum.

Among analysts, the Apple-Samsung outcome broke down predictably based on what side of the planet they were on. For instance, Morgan Stanley analyst Katy Huberty gushed about Apple's competitive position and potential market share gains. Analysts in Asia noted that Samsung can weather the storm handily.

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For now, there are a few key points to consider from the Samsung side of the equation. To wit:

It's all about the Galaxy S3 and Galaxy Note. An injunction on Samsung's 25 models highlighted in the Apple lawsuit really wouldn't matter much. Why? The products aren't on the market and certainly don't have significant volume. Apple will try and get an injunction on the Galaxy S3 and Galaxy Note. However, that move isn't a slam dunk given that Samsung's S3 is different than the S2. Should Apple get an S3 injunction it'll effectively freeze most Android handsets in the U.S.

Should the S3 elude an injunction, Samsung is in good financial shape. Deutsche Bank analyst Seunghoon Han said:

We note that the smart phones subject to the court ruling are older models and not the flagship models (Galaxy S3/Galaxy Note) that Samsung is currently selling in the U.S. market, and as a result may only have limited impact on Samsung smartphones sales in the US in 2H12. We believe the longer-term impact may be limited as Samsung has already been re-designing smartphones since Apple filed its patent claims in April 2011.

The U.S. is big, but not everything to Samsung's profit power. The U.S. accounts for 20 percent of Samsung's smartphone shipments. If all Samsung devices were kicked out of the U.S.---unlikely---the worst case is 20 percent market share evaporates. That hit would hurt, but losing to Apple in Europe and China would be far worse. Barclays analyst SC Bae said in a research note:

If Samsung were to lose its EU and China markets, the impact would be critical. We believe that the U.S. verdict may impact negatively on the ongoing lawsuits in other regions to some degree; however, the magnitude of the impact won't be significant given the conflict of the interests. For example, China, Japan and Taiwan have a number of smartphone manufacturers that could be directly affected by the result of the lawsuit. Other regions, including the EU, might have more neutral positions than Asian countries. However, we believe they might also consider the point that Apple's win would result in the inflation of smartphone prices. We believe the preliminary results from the Japanese court, which will be delivered on 31 August, will give an early indicator for the rest of the lawsuits.

Future royalties may be minimal. Bae noted that Samsung is likely to run around most Apple patents except for Apple's pinch to zoom patent. Samsung would have to pay royalties on that one.

Samsung could screw up Apple's supply chain. The Apple-Samsung relationship is very complex. Apple is Samsung's largest customers. Here's the supply chain moving parts via Bae:

• Apple's component purchases from Samsung don't amount to more than 5 percent of the Korean giant's operating profit.
• Apple, however, depends on Samsung for memory and screens.
• Should Samsung tell Apple to take a hike, Apple's negotiating power won't be as strong.

Samsung's brand can recover and may improve outside the U.S. To the rest of the world, Apple clearly had home-field advantage in the U.S. lawsuit. Samsung may look better outside the U.S. Travel abroad and you notice that Samsung devices are everywhere. 

Appeals will delay any profit hit. Apple was awarded less than the $2.5 billion it wanted. There are already arguments brewing that the jury was off.