Verdict seen as a temporary thorn in company’s side

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Verdict seen as a temporary thorn in company’s side


Samsung Electronics’ stock price plummeted yesterday after the company lost its high-profile patent infringement case with Apple on Friday (Pacific Standard Time), but analysts predict the U.S. ruling is only likely to cause it a temporary setback.

Shares of Korea’s biggest-cap stock closed at 1.18 million won ($1,040) after plunging 7.45 percent from the close of trade Friday as investors reacted nervously to the jury’s recommendation that Samsung pay Apple $1.05 billion in damages, making it one of the most expensive patent litigations in history.

The tumble erased 14 trillion won from the company’s market value but only caused the benchmark Kospi to shed 1.94 points to close at 1,917.87.

However, analysts remain optimistic that the tech leader’s share price won’t drop below 1 million won and that the ruling will not gravely affect Samsung’s smartphone sales.

“We’re still waiting for the judge’s ruling in regard to the jury’s verdict, and we still have [the expected process of Samsung] appealing to the U.S. Court of Appeals and the U.S. Supreme Court. Then again, the verdict is likely to deal a substantial blow to Samsung given that there is slim chance of the judge overturning the jury’s verdict in this trial,” said Song Myung-seob, an analyst at HI Investment & Securities.

“Lowering the amount of damages and not banning Samsung’s products in the United States could be the best possible result for Samsung at this point.”

About 12 percent of Samsung’s smartphone sales were generated in America last year, he added. While some analysts feared the U.S. ruling could threaten the local bourse given its dependence on the nation’s top electronics maker, the Kospi reacted with relative calm to the news and was barely affected by the result of the so-called “patent suit of the century.”

Although Apple is likely to seek an injunction barring U.S. sales of key Samsung products, Song Jong-ho, an analyst at KDB Daewoo Securities, said even this would not seriously threaten Samsung’s stock price.

“Even if we take into consideration that a court may accept Apple’s sales ban on Samsung products, that would only have a limited impact on Samsung Electronics’ share price,” Song said. “The firm’s shares will stay at around 1.1 million won. I don’t think Friday’s verdict will deliver fatal damages to Samsung’s smartphone sales given that the verdict excluded the Galaxy S3, the company’s latest product.”

Samsung, the leading company to use Google’s Android mobile operating system, is scheduled to unveil its Galaxy Note 2 at a trade show in Germany today, ahead of the iPhone5’s expected launch in September.

Lee Se-cheul, an analyst at Meritz Securities, kept a “buy” recommendation for Samsung and maintained his six-month target stock price of 1.8 million won.

“Samsung is estimated to have sold 50 million smartphones globally in the second quarter, nearly double Apple’s 26 million units,” Lee said.

“While Apple is targeting the global market with a single smartphone model, Samsung has adopted a mass-customization strategy.

“Given that the smartphone market has entered a significant growth stage, following its introductory stage, Samsung’s strategy would seem to give it an advantage. The sales gap between Apple and Samsung will widen as the latter is scheduled to launch lower-end smartphones targeting a broader customer base in the near future.”

Meanwhile, shares of companies that supply Samsung with components, such as Daeduck GDS and Samsung SDI, tumbled yesterday, while Apple’s local component supplier LG Display went up.

By Kim Mi-ju []

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