This morning, as the financial markets opened, the share price of Samsung reacted to the weekend’s news. Apple was awarded $1.05 billion in damages after a US court found Samsung had copied key features of the iPhone and iPad in its rival products. Almost immediately Samsung decided to appeal and accused Apple of using patent laws in an attempt to dominate the smartphone market.
Share value and expectations
Investors are worried about how the ruling in the US will affect Samsung’s future revenues. Summing it up nicely John Park, from South Korea based Daishin Securities, said “An adjustment in the next few days is unavoidable as the damage amount was much bigger than market expectations, and there are further uncertainties, such as the possibility of a sales ban” in an interview with the BBC.
Samsung shares ended 7.45 per cent in the red after the day’s trading in South Korea. This is equivalent to the value of the company dropping by US $12 billion.
Following the Californian court decision Samsung said “It will lead to fewer choices, less innovation, and potentially higher prices.” Samsung called the decision as “a loss for the American consumer”. In the other corner, Apple congratulated the court “for sending a loud and clear message that stealing isn't right.”
Some Samsung handsets were shown to look like they followed Apple’s industrial design, the overall external appearance. Worryingly for Google (Android) two usability features of the software aspects were also shown to “copy” Apple’s iOS. These are “tap to zoom” and the “bounce back response” at the ends of scroll lists. (However I remember designing Flash interfaces for websites that had this feature in year 2001, so “bounce back” is quite an “old” interface feature)
Apple’s next move; 20 Samsung products to be removed from sale
Following on from its court success in the US, Apple will now seek injunctions on US sales of 20 of Samsung’s 152 phone products (39 of these are smartphones; 35 Android powered and 4 run Windows Phone). In Apple’s hit list the most high profile models are the Samsung Galaxy S2, Galaxy S, and Nexus S. The best selling Galaxy S III and Galaxy Note aren’t under threat at this time but investors worry Apple will turn its attention onto these best sellers.
What happens next?
Andrew Milroy, from market analysts Frost and Sullivan said the ruling sets a precedent for any other Android OS smartphone maker to consider when bringing devices to market. So it’s not just Samsung who should be worrying about what happens next. There are a plethora of other Android smartphone and tablet makers and even Google’s Android OS that may be targeted by litigation shortly. Mr Milroy also said this court case will ultimately be good news for Microsoft, whose products (Windows Phone (Nokia Lumia)) were held up as an innovative competition.
A Hong Kong based market analyst spoke to Reuters about the impact of the ruling “Samsung should be OK - it means a 4-5 percent hit to the bottom line”. He continued to explain; “Both companies are in the midst of a squabble but I don't think it's a structural negative for Samsung. At the end of the day, as Forbes reported recently, Samsung has 65,000 patents versus 9,000 for Apple. Furthermore, Apple relies on Samsung for the processing brains of their phones. I sold Samsung four months ago but am watching the stock closely now”.
Overall investors are rightly nervous, without thinking this is an absolute catastrophe from which Samsung can’t recover. The case against Samsung and Android phones may bring more innovation to smartphone industrial design and interface design. Additionally smartphone makers might put more resources into developing phones powered by the new Windows Phone 8.