Apple legal win bumps up stock and, possibly, business

Apple's legal patent victory against Samsung has already boosted the stock and paves the way for higher gains in market share for the next-generation iPhone, analysts say.


Apple shares are up about $14, or two percent, following the company's legal win against Samsung last Friday.

On Friday, a jury found that Samsung had infringed on several mobile device patents owned by the iPhone maker, awarding Apple more than $1 billion in damages.

This morning's jump pushed Apple's stock to a new intraday high around $676 per share. On the flip side, the stock of Android OS maker Google dipped about 1.3 percent in morning trading to around $669.

Apple's iPhone 5 will likely be another beneficiary of the legal victory, some analysts say.

The verdict serves as a warning not just to Samsung but to other smartphone makers, providing a boost for the next iPhone, according to Morgan Stanley analyst Katy Huberty.

"Apple's legal win against Samsung increases our confidence in iPhone 5 share gains over the next year, as many smartphone makers may need to re-consider software and design features in current or upcoming smartphones," Huberty wrote yesterday in a note to investors.

The iPhone's average market share rose around 2 percentage points over the last two years, according to the analyst. Morgan Stanley had been eyeing a small market share gain next year but now believes its estimate may be conservative in light of the verdict.

And though Apple could certainly put $1 billion to good use, the money is relatively insignificant compared with the predicament now faced by the company's rivals.

"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," Huberty added.

Other analysts also expect the verdict to stimulate Apple's market share as rival companies change their plans for new devices.

Michael Walkley from Canaccord Genuity sees an even "stronger competitive market position" for Apple as it prepares to launch the next iPhone and other products.

"While a ban would likely increase Apple's leading smartphone share in the U.S. market, we believe this verdict could lead to Samsung also delaying near-term product launches as it attempts to design around Apple's patents," the analyst wrote in a note out today. "We also believe other Android OEMs, such as HTC, Sony, and LG, will review this patent verdict and potentially alter and delay planned Android smartphones and tablets."

Other Android vendors are likely to be next on Apple's legal hit list. RBC Capital Markets analyst Mark Sue expects Apple to now pursue cases against HTC, LG, and potentially other companies.

Apple is also still in the midst of other patent cases outside the U.S. Further victories in those instances would cement market share gains in Europe, according to Raymond James analyst Tavis McCourt.

"A legal win in Europe would likely be more important than a win in the U.S. given Samsung/Android's far greater success in Europe than in the U.S. vs. the iPhone," McCourt said in a note out today. "In a typical quarter, Apple will sell two-thirds of iPhones outside the U.S. and we believe over 80% of Android devices are sold outside the U.S."

Finally, Berstein Research analyst Toni Sacconaghi, Jr. doesn't see any "immediate direct effect on the sales of Samsung's latest and most important handset product, the S3, or on handsets or tablets from other manufacturers." However, he sees two possible paths ahead for Apple and the industry.

After all of the legal tactics have been played out, Apple is likely to receive royalties from Android device makers totalling anywhere from $3 to $25 per handset. Alternatively or in addition, those manufacturers may also have to redesign the devices that were found to have violated patents. That could "modestly change the look and feel of competing products," Sacconaghi said.

Of course, the legal strum and drang is far from over. A hearing will occur September 20 in which Apple and Samsung will argue over which Samsung mobile products could face a sales ban in the United States. U.S. District Court Judge Lucy Koh also has the power to increase the damages if she finds that Samsung willfully infringed on Apple's patents.

Samsung, though, isn't standing still. The company is expected to appeal Friday's decision, vowing to take the case all the way to the Supreme Court if necessary.

But the outcome still presents an obstacle for other device makers. And it's one that stands to help Apple gain some healthy market share lost to its Android rivals over the past couple of years.

Updated 8:30 a.mwith updates on stock prices and more analyst comments.

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