Apple Vs. Samsung: Will It Awaken The Mobile Industry's Sleeping Giant

| About: Microsoft Corporation (MSFT)
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Apple's (NASDAQ:AAPL) huge patent infringement victory over Samsung (OTC:SSNLF) last week resulted in a massive $1.049 billion fine for Samsung, a 1.88% rise in Apple stock on Monday and a group of Android vendors deeply concerned about future product releases. While the infringements were judged to be highly specific, the ramifications may prove to be very broad indeed.

In particular, the jury ruled that several of Samsung's smartphones imitate specific features of Apple's iOS too closely. However, more is to be determined when U.S. District Court Judge Lucy Koh rules at a September 20th hearing, in which Apple and Samsung will argue over which Samsung mobile products might face a sales ban in the U.S. Bloomberg reports that Apple is seeking U.S. bans on 8 Samsung devices including four Galaxy S II models, but not the Galaxy S III. The S III was launched too late to be included in Apple's suit; therefore an injunction request might require another legal action.

Judge Koh also has the power to increase the damages if she finds that Samsung willfully infringed on Apple's patents. Samsung is expected to appeal Friday's decision. Analysts believe Apple will now pursue cases against other Android vendors including HTC (HTCXF.PK) and LG. Samsung's shares have, of course, taken the immediate brunt with its total value finishing the day down 7.45%, cutting $12 billion of the electronic company's market value. But don't be surprised to see the stock of other Android vendors take a hit.

The "Other" Big Winners

"The real question," as Mark Lemley, a Stanford Law School professor, put it in an e-mail after the initial verdict, "is whether this is enough to derail the momentum the Android ecosystem has gained in the marketplace." If Samsung and other vendors are forced to pull products from the market and/or redesign future products, how much consumer confidence will be shaken in the Android product sphere? Or in the unlikely event that Apple and Samsung now come to an out of court settlement and Samsung belatedly agrees to a previously reported $30 licensing fee, will the consumer be asked to pay that premium or be forced to pay other so-called "Apple Taxes?" These uncertainties all point to two sleeping giants in this mobile space as the likeliest "other" winners.

Microsoft (NASDAQ:MSFT) may be the big winner here along with its closest mobile phone partner, Nokia (NYSE:NOK). News of the court ruling sent Nokia's stock up 5.52 % to $3.25. Nokia has become increasingly protective of its own patents, which are considered to be one of the industry's strongest portfolios of intellectual property rights. Analysts put a value of this portfolio at between EUR 4 billion and EUR 10 billion. In fact, in the trial against Samsung Apple's lawyers actually used new Nokia Lumia devices to demonstrate that it is possible to make mobile phones that are very different from Apple's iPhone. Last year, Nokia agreed to adopt Windows Phone as its principal operating system and to pay licensing fees to Microsoft. In exchange, Nokia said Microsoft would provide it with billions of dollars to help develop and market products. Nokia recently announced that it would release two Windows Phone 8 devices in September. Nokia plans to distinguish itself from competitors by redefining mapping and location-based NAVTEQ services among other features. Nokia is positioned as the clear Windows Phone 8 flag-bearer.

Microsoft Windows Phone 8 may well offer a welcome safe harbor to OEMs and consumers alike. The new platform promises to unify its desktop/tablet and phone operating systems with shared code, making it much easier for developers to write apps that run across all windows machines. Microsoft is reportedly continuing to offer developers anywhere from $60,000 to $600,000 to build applications for Windows 8. So while the number and range of apps are nowhere near as deep as those for iOS or Android, that could quickly change with the arrival of Windows 8 developers. I will be keeping a close eye on what Microsoft does in the mobile space in the future.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.