Nokia wins in Apple-Samsung verdict

The decision casts doubt on Android development, which may steer some phone makers to Windows 8.

By Jim J. Jubak Aug 27, 2012 5:22PM
The financial markets seem to have decided that the winner from Apple's (AAPL) big victory in its patent trial against Samsung is… Nokia (NOK). Shares of Apple rose nearly 2% Monday to close at $675.68, but shares of Nokia rose 5.5% to close at $3.25.

I think that's about right. The verdict will result in delays and uncertainty in developing new phones and tablets built on Google's (GOOG) Android operating system that will push some phone makers toward Microsoft's (MSFT) new Windows Phone 8 software. And frankly, anything that gives that software more visibility and credibility in the market -- Windows phones have just 3.5% of the smartphone market, according to IDC -- is going to be critical to Microsoft's hopes to revive its smartphone fortunes and to Nokia's chances for survival. (Microsoft owns and publishes Top Stocks, an MSN Money site.) 

Nokia has grabbed 59% of the market for Windows smartphones, up from 22% in January, but if Windows Phone stays stuck under 5% of the market that dominance isn't going to be enough to power Nokia's turnaround.

The headlines trumpeted the $1 billion jury verdict against Samsung. (The jury found that Samsung had infringed on six out of seven Apple patents.) But the money is only about 5% of Samsung's expected 2012 profit. And it can still be reduced or overturned on appeal. Apple certainly can’t expect to find a more favorable venue for the appeals than the San Jose court where the original trial was held.

Apple has asked for an injunction that would prevent Samsung from selling eight models of phones in the United States. The models include the Galaxy S4G, the Droid Charge, the S2 Skyrocket, and the Prevail, but the list doesn’t include the newest and best-selling Samsung models. Apple has asked for the judge in the case to issue an injunction against the cellular version of Samsung’s tablet, but since that tablet wasn’t included in Apple’s court win, I don’t think Apple is likely to prevail on this issue. The injunction hearing is scheduled for Sept. 20.

Even if Apple wins an injunction against the sale of those eight Samsung phones, it’s not likely to have much effect on the battle for market share between Samsung and Apple. In the near term, that still hinges on the success of Apple's launch of the iPhone 5 in September. The Samsung product that is the big competition to the iPhone 5, the SIII, wasn’t part of the patent case.

At worst, Samsung will need to go back to the drawing board on some products to make sure that they don’t infringe on Apple’s look and feel. The Korean company has the resources to throw to make sure that any re-engineering doesn’t cost it significant time to market.

The big losers in the case are smaller makers of Android-based phones (Everybody is a smaller Android-based phone maker than Samsung, the No. 1 company in that market. Which was Apple’s point -- if Samsung couldn’t prevail, what chance do you think you have, was the message.) These smaller phone makers have less in the way of resources and a significant delay in getting new products to market could leave them dead in the water. Phone makers such as HTC have already had their court run-ins with Apple and after the Samsung verdict you can bet these companies are worried that Apple will come after them even harder.

What’s especially disappointing in this case to these smaller companies is the lack of protection provided by Google and the slew of patents it acquired in its purchase of Motorola Mobility. Looking at the Samsung case, any smaller phone maker would have to assume that Apple would come directly at them rather than at Google and that Google’s help would be relatively minor. (It is an irony of the case that an e-mail from Google to Samsung advising the company to change its products was crucial in winning the jury to Apple’s point of view. I’m sure nobody at Samsung or Google found that amusing.)

Looking over the intellectual property landscape, I’m sure at least some phone makers are struck today by the difference between Android’s position and that of Microsoft’s Windows Phone 8 (and Nokia’s phones.) Both Microsoft and Nokia have struck extensive cross-licensing agreements with Apple.

If you decide to produce a Windows phone, you can be pretty sure that Apple isn’t coming after you anytime soon -- and if it did, it would have to fight it’s way through Microsoft first. I don’t think it's a coincidence that phone makers such as ZTE and Huawei have announced that they’ll be introducing Windows Phone 8 models. Seems only reasonable as a way to hedge a bet or two.

All this is an interesting prelude to September’s week of the phone that begins on Sept. 5 with Microsoft’s product event and continues through Sept. 12 when Apple unveils its new iPhone.

After that, once the phones are actually on sale, it will again be up to consumers to decide.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did own shares of Apple and Nokia as of the end of March. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 

Aug 27, 2012 8:24PM
My difficulty is that Apple seems to have capitalized on the design of the handheld computers on Star Trek: Next Generation. Perhaps Paramount should put Apple out of the smartphone business? Doesn't the look and feel of the Apple products look strangely like the Handspring Treo?
Aug 27, 2012 6:51PM
Very, very long Nokia at $3 per share average. Take tax loses for year end and average will be closer to $2 per share.  Android's an advertising virus and Apple's iToys are overpriced. The PC's Mobile and I can't wait for my Lumia 900 to sync with my Surface RT tablet.
Aug 28, 2012 1:13AM

Why buy apple or samsung or google products ?


answer; Make the company and there share holder rich


why buy microsoft ?


Simple atleast he donates his wealth to charity

i would rather buy product of the company which helps and does charity

Aug 28, 2012 1:52PM
AAPL's decline isn't going to be amusing.
Aug 29, 2012 12:43AM
My Great, Great, Great Grandfather from Germany was the first to put a steering wheel on a carriage. Every car built after that has the look and feel of my grandfather's idea...I will file a lawsuit for 100 trillion dollars against all the automobile manufacturers in the world. That lawsuit of course will be in the U.S., preferably in a liberal, Looney tune state where I am guaranteed to find a jury of clowns that could be easily convinced that my rights were infringed upon...
Aug 27, 2012 6:17PM
The reports that I have seen indicate that the Microsoft Windows 8 has a lot of programming that is not in the best interests of the user.  "But there is a fix for that."  Why buy something that is broken on delivery?  I'm tired of five updates every week because Windows 7 wasn't programmed correctly.  Updates that disable third party software like my printer or graphics card.  Now I can step up to Windows 8 and find more mistakes?  Not Likely.  The higher upfront costs of Apple merchandise seem to result a cheaper, longer lasting and less frustrating system.  Nokia may end up with Dell and HP in the lost revenue department.
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