Winners and Losers in the Wake of Apple's Victory

The whole mobile sector is feeling the shockwaves of Apple's major legal win against frenemy Samsung regarding its copycat ways. Beyond the headline players of Apple, Google, and Samsung, there are numerous other winners and losers that are likely to see some fallout from the monumental decision, for better or for worse.

Microkia: winner
One of the more obvious winners to the Android setback is Microkia. The potential legal ramifications that other Android OEMs may now perceive provide an incentive to give Microsoft's (Nasdaq: MSFT  ) upcoming Windows Phone 8 platform more consideration. The software giant has been aggressively gunning to grow it mobile market share, with little to show for it.

Operating System

Q2 2011

Q2 2012

Android 46.9% 68.1%
iOS 18.8% 16.9%
BlackBerry OS 11.5% 4.8%
Windows Phone 7 / Windows Mobile 2.3% 3.5%

Source: IDC (August 2012).

Android and iOS continued to grow their collective share to 85% in the second quarter, while Research In Motion (Nasdaq: RIMM  ) saw its slice sliced to less than half of what it was. Microsoft gained, but its overall share remains unimpressive. The blow to Android could help Mr. Softy boost its market share if OEMs begin to diversify their platform bases to mitigate potential legal risks now associated with Android. Microsoft shares finished up slightly today. So did RIM, along with other Android competitors.

Microsoft's partner in crime Nokia (NYSE: NOK  ) enjoyed much higher gains, closing up more than 5% today. Of course, Samsung just recently overtook Nokia to become the top mobile-phone maker in the world, after Nokia enjoyed its time in the sun for a solid 14 years, so any blow to Samsung is good news for Nokia. Add in the fact that some analysts think Nokia is just plain cheap, and you have a recipe for a nice pop on some good news. The verdict doesn't immediately give Nokia any major openings, but as Apple and Samsung continue to wrangle through the appeals courts and such, the Finnish company might be able to capitalize as the two top dogs distract each other.

Universal Display: loser
OLED specialist Universal Display (Nasdaq: PANL  ) saw its shares drop by as much as 10% on the news, as Samsung is UDC's largest customer by far. Many of the Samsung devices that were deemed guilty of infringement include OLED displays built using UDC's technology and materials. The next step of the ongoing battle will have Apple seeking sales injunctions on Samsung's devices, which could potentially hurt UDC's material sales to Samsung.

Meanwhile, Apple currently doesn't use OLED technology in any of its products, largely because of capacity and supply constraints with the newer technology, so the net result on UDC's top line could potentially be very negative.

However, device makers are typically able to quickly design around patents, including when Samsung slightly modified its Galaxy Tab 10.1 last year to avoid Apple patents and a related sales injunction in Germany. Android OEM HTC also pulled a similar move this year after Apple scored a separate legal victory. Assuming Samsung is able to redesign around Apple's patents rather quickly, which shouldn't be a problem for one of the largest electronics conglomerates in the world, the long-term effect on UDC should be negligible.

Qualcomm: winner
Within the gadgets, baseband king Qualcomm (Nasdaq: QCOM  ) stands to benefit from the outcome. The mobile-chip giant dominates the baseband market with an estimated 50% to 55% market share, yet its share within just Samsung's devices sits between 10% and 15%, according to estimates from Nomura Securities analyst Romit Shah. Qualcomm is also currently the exclusive supplier of baseband chips for newer Apple devices, sitting in every single iPhone 4S and LTE-equipped iPad 3.

To the extent that the smartphone market shifts toward devices where Qualcomm enjoys more baseband wins, the company stands to see some revenue gains. On the flipside, Qualcomm also supplies processors to Samsung, so you'd need to look at the effects on both the baseband and processor businesses.

Its newest Snapdragon S4 mobile processors are found in some of Samsung's smartphones, including its current flagship Galaxy S III, which wasn't included in the lawsuit. The Galaxy S II, which was included in the lawsuit, also carries an older Snapdragon S3, so falling sales in certain Samsung devices could be somewhat of a double-edged sword.

Apple: winner
With as quickly as the smartphone market is growing, there's a lot at stake for these companies. Clearly, this was a big win for Apple, which is why Apple's run isn't over yet. Grab our brand-new premium report on Apple and get free updates at no additional cost.

Fool contributor Evan Niu owns shares of Apple, Qualcomm, and Universal Display, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Apple and Universal Display. Motley Fool newsletter services have recommended buying shares of Microsoft, Universal Display, Google, and Apple, creating a synthetic covered call position in Microsoft, and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 30, 2012, at 10:06 PM, TMFSymington wrote:

    I'm not concerned about the effects of this suit on PANL, either. In addition to your observation that Samsung will innovate its way around the infringements, also keep in mind Samsung's USA sales are a relatively small slice of its pie with Asia sales making up the lion's share. Also, the Galaxy S3 (currently their biggest seller) isn't covered under this suit, and neither is the new Galaxy Note "phablet." Combine this with the new revenue streams PANL should receive from next year's OLED TV ramp and potential future lighting revenue, and the impact on PANL's material sales should be negligible.

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