What Apple's victory means for Samsung

Aug 29, 2012

 

Samsung’s loss to Apple could be a win for Nokia and Microsoft

 

 

Nokia Oyj and Microsoft Corp., both looking to increase U.S. sales of smartphones, stand to get a much-needed boost as Samsung Electronics Co. products face a possible ban and handset makers come under pressure to consider alternatives to Google Inc.’s Android software.

A federal jury awarded Apple Inc. more than $1 billion on Aug. 24, saying Samsung infringed on six of seven patents for mobile devices. U.S. District Judge Lucy Koh will weigh Apple’s request for a ban on U.S. sales of some devices from Samsung, the dominant maker of Android phones, next month. Some Android equipment makers may turn to platforms such as Microsoft’s Windows 8 to avoid a similar trip to court, said Carolina Milanesi of the research firm Gartner Inc.

“I am sure that vendors in the Android ecosystem are wondering how long it will be before they become Apple’s target,” Milanesi said in an interview. “This might sway some vendors to look at Windows Phone 8 as an alternative, and for the ones like HTC Corp. and even Samsung, who have already announced plans to bring to market a WP8 device, how much stronger their investment should be.”

The ruling will allow Apple to defend its intellectual property more vigorously, Bloomberg Industries analyst John Butler said in a report.

Microsoft Benefits

Nokia, based in Espoo, Finland, jumped as much as 12 per cent in Helsinki and traded 8.4 per cent higher at 4:11 p.m. local time. The stock had dropped 34 per cent this year through Aug. 24. Microsoft climbed 1 per cent to $30.87 in New York.

Samsung, which had risen 21 per cent this year before the U.S. court ruling, slumped as much as 8 per cent in Seoul, the biggest decline in more than a year. Apple climbed 2.3 per cent to $678.32.

BlackBerry maker Research in Motion Ltd. gained 3.3 per cent to $7.17 in New York. RIM will largely miss an opportunity to benefit because the first of the new BlackBerry 10 phones it’s counting on to win sales won’t arrive until next year’s first quarter, said Horace Dediu, a former analyst for Nokia who now runs mobile-phone industry research firm Asymco.com in Helsinki.

Microsoft stands to gain the most, Dediu said. The Redmond, Washington-based company has already prevailed in patent disputes with Android user Motorola Mobility, which is owned by Google. Microsoft has won orders that banned U.S. imports of some Motorola devices and limits on sales of some of the company’s products in Germany.

Android Costs

“Microsoft can go in to all these accounts and say, ‘Let us remind you again of the cost of Android,’” Dediu said. “What Microsoft has always had trouble with is getting these vendors to switch.”

Samsung sells dozens of Android phone models, according to its website, compared with three for Microsoft.

Microsoft could also boast it offers legal protection that Google, by giving away Android for free to vendors, hasn’t provided, Dediu said.

“With Windows phones, you’re protected against IP lawsuits because, if anybody sues, they are going to talk with Microsoft,” he said. “Microsoft can do that because they actually do have their IP pretty well sorted out.”

Nokia decided to become partners with Microsoft last year after jettisoning its aging Symbian platform that had failed to keep up with Apple’s iPhone and Android devices. Nokia’s global mobile-phone market share dropped to 20 per cent last quarter from 23 per cent a year earlier, according to Gartner. Android’s share among platforms rose 21 percentage points to 64 per cent, while Cupertino, California-based Apple’s iOS had 19 per cent.

Getting Traction

“Right now, for Nokia, it is a case of ‘the more the merrier,’ as the strength of the ecosystem is what they need to get traction with consumers and carriers alike,” said Milanesi, of Stamford, Connecticut-based Gartner.

More important than the Aug. 24 U.S. court ruling is the injunction Judge Koh is considering issuing next month, said Mark Lemley, a professor at Stanford Law School in Stanford, California.

“The real question is whether this is enough to derail the momentum the Android ecosystem has gained in the marketplace,” Lemley said in an e-mail.

Many of the infringement claims don’t have anything to do with the Android software, Google said yesterday in an e-mail.

Lumia Phones

“Most of these don’t relate to the core Android operating system, and several are being re-examined by the U.S. Patent Office,” Google said in its statement.

The injunction may give other handset makers a welcome boost, said Michael Schroeder, a Helsinki-based analyst at FIM Bank.

“A potential sales ban on Samsung products will create some additional room for Nokia as it is preparing to ship the new lineup of Lumia devices over the next couple of months,” Schroeder said.

Nokia continues to focus on expanding the entire Windows Phone system, said Susan Sheehan, a spokeswoman. She declined to comment on the Samsung ruling.

Last quarter Nokia sold 600,000 handsets in North America, little changed from the previous period even after introducing the flagship Lumia 900 in April at AT&T Inc. Apple sold 5.9 million iPhones, which then-CEO Steve Jobs introduced in 2007, in the U.S. in the quarter, according to Strategy Analytics. Microsoft’s mobile platform gained speed, winning 2.7 per cent of global sales compared with 1.6 per cent a year earlier, Gartner said.

Elop’s Bet

Nokia is set to show its new Lumia smartphones running Microsoft’s Windows Phone 8 software on Sept. 5. Stephen Elop, the former Microsoft executive who was brought aboard in 2010 to revive Nokia, is now betting that a wave of advertising spending by Microsoft to push the new Windows 8 operating system will help accelerate demand for Lumia.

Tara Walberg of New York-based public relations firm Waggener Edstrom Worldwide, speaking on behalf of Microsoft, declined to comment.

While RIM is fighting a similar battle to regain lost market share with a new platform, it is months behind Nokia. RIM’s take of global smartphone platforms fell to 5.2 per cent last quarter from 12 per cent a year earlier. The first two new models of BlackBerry 10 devices—a touchscreen and a traditional Qwerty keyboard version—won’t be out until early next year, well after the iPhone 5, expected out next month.

RIM’s Battle

RIM’s sales fell 43 per cent last quarter as its aging lineup of devices failed to excite buyers. Chief Executive Officer Thorsten Heins said earlier this month that the new BlackBerry 10 platform will soon be ready to license to other manufacturers, even as his company races to release its own handsets with the software early next year.

Waterloo, Ontario-based RIM has no comment on the case, said Amy Jones, a company spokeswoman.

Asymco’s Dediu said RIM doesn’t stand to benefit in the same way because it won’t have a new competitive product until next year. RIM’s stock has fallen 76 per cent in the past 12 months and is 95 per cent off its 2008 high.

“RIM is not competitive,” Dediu said. “RIM’s story will be more next year if they are able to recover.’

The lasting damage may ultimately be to Samsung, not Google, because the judge ruled the infringements had less to do with the Android operating system and were more related to imitating the iPhone’s design, said Edward Snyder, an analyst at Charter Equity Research in San Francisco.

‘‘Apparently, they lifted too much of the look and feel from iPhone, but I don’t believe it has much to do with the Android OS, and even if it did, I doubt Google would have much trouble designing around it,” Snyder said. “We’re unlikely to see a big push to Windows because of this.”

 

Source: Toronto Star