As Samsung Electronics (SSNLF, quote) rested its case in a trial against Apple (AAPL, quote) over possible patent infringement in smartphone technology, the share price of the South Korean giant dropped in Friday trading.
Samsung HQ in Seoul, Korea
Before you decide whether or not to jump into Samsung, you must evaluate the ramifications or benefits of any possible verdict.
Currently, Samsung is suing Apple in U.S. District Court for damages of roughly $400 million over alleged patent infringement on the Korean firm’s smartphone technology. Samsung is demanding royalties for Apple making use of this technology. Apple considers Samsung’s claim to be unfair as the royalties demanded are supposedly far more than standard industry practices.
While the amount of damages demanded may superficially seem like pocket change to these two tech giants and their massive cash hoards, we need to evaluate the two companies’ arguments in a larger global context.
Apple has recently won a preliminary ban preventing Samsung from selling one of its tablets in the United States; the firm would like to extend this ban to the Korean company’s smartphones as well. While a defeat for Samsung in the current case would not necessarily result in this ban coming to fruition, this would yield increased precedent of favoring Apple’s claims over Samsung in the United States, which would not bode well for the Korean chaebol.
Although America’s smartphone market may not be growing as fast as that of China, it remains one of the largest smartphone markets in the world; inability to sell in the United States would severely affect Samsung’s bottom line.
With that in mind, it remains unlikely that Samsung’s newest offerings will be banned in the United States. For investors interested in both firms, a settlement would be ideal. This way the products could stand on their own merits, as opposed to a drawn-out legal battle spanning multiple continents.
As long as there are no unexpected, sweeping declarations in the verdict, investors in Samsung should not be overly concerned.
Disclosure: Author is long AAPL
