Apple Inc. (NASDAQ:AAPL) and Samsung have been fighting over patents in court. While we have reported the details of the case, many experts believe that investors do not realize how damaging this court case could be for Samsung. Samsung potentially faces billions of dollars in fines. CLSA research has put out a detailed report on the summary of the case.
Some major details are listed below:
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The risk to Samsung is very real, however this case is just the end of the beginning; investors should prepare for a drawn out battle. The Android ecosystem’s counter attack has just begun.
CLSA has a nice calendar of the case which started in April 2011 and now is being deliberated by the Jury.
A bit on the economics of the potential fines Samsung faces:
Just the facts
The current US case dominating headlines will produce a result within two weeks.
Apple Inc. (NASDAQ:AAPL) asked Samsung for a net US$24/phone and US$30/table in royalties in 2010
This case only covers primarily legacy phones on which Apple’s damages claim are reported as c.US$2.5bn and Samsung’s counter claim as just over US$400m.
As counter suits mount, more than 50 cases are now lodged in at least 9 countries.
The key issues
Apple Inc. (NASDAQ:AAPL) probably wants to: (1) force meaningful differences in design to differentiate the Apple products, (2) slow competitor progress and reduce their appeal through forced removal or changes of features and (3) maximize their financial advantage through royalty revenues and raising the relative cost of Android manufacturers.
Samsung can settle or attempt to regain some ascendency through more aggressive counter suits. This is best done in coordination with Google Inc (NASDAQ:GOOG), who launched a new attack on Apple Inc. (NASDAQ:AAPL) via its Motorola subsidiary last Friday.
Android has been fighting from a position of weakness thus far, but as time progresses the substance of the response will dramatically improve.
The direct impact of a US loss could in theory lower 2013 earnings by about 4%. However, there would be indirect impacts also on the components businesses, so perhaps we should view the total earnings risk as 5% or 6% under that scenario.
Samsung is highly unlikely to settle before a stronger defence is mounted. A global license on Apple’s terms could lead to a 2013 payment of c.US$6.6bn or 7.5tn won, which would lower 2013 EPS by 24%. This is highly unlikely.
CLSA has much more information on the case and ramifications. This is just the initial post, we will post in more depth shortly.
(Disclosure: No position)