Apple Claims $2.2B in Damages - Analyst Blog

During the course of the recent trial between Apple AAPL and Samsung, the former claimed $2.2 billion as damages from the latter for infringing on five of its patents in the U.S District Court in San Jose, CA.

Apple justified the aforesaid amount of damages by saying that it accounted for more than 37 million smartphones and tablets sold by Samsung during the period of infringement stretching from Aug 2011 to the end of 2013.

Moreover, Apple claimed that the concerned patents covered certain software that made the use of phones easier, an area of weakness for Samsung's smartphones since inception. Further, Apple went on to claim that since Samsung was its primary rival, it happened to gain the maximum from any infringement, which resulted in reduced demand for iPad and iPhone.

In an effort to back its claim, Apple produced an internal email from 2010 in which the then mobile business head of Samsung said that the company was suffering from “design crisis” and it needed something like the iPhone to pull up its sagging sales. The same mail also compared the iPhone and Samsung's phones stating the difference between the two as heaven and hell.

It is noteworthy that Apple has made good use of the email during the first trial between the tech-giants that had taken place in 2012, which Apple won and was awarded a sum of $930.0 million in damages.

Samsung refuted the claim by saying that Apple had exaggerated the worth of its patents. Moreover, Samsung retaliated by claiming damages to the extent of $7.0 million for two of its software patents that it claimed Apple had violated.

Further, Samsung clarified that the driving factor behind consumer demand happened to be “branding” and its branding prowess was responsible for the surge in its sales and not Apple-patented features.

In their continuous endeavor to dominate the worldwide smartphone market, both the companies have spent millions of dollars in legal fees since Apple initiated the fight in 2011, accusing each other of copying their respective products.

Per Bloomberg, the smartphone market was valued at $338.2 billion last year. Samsung accounted for 31.0% of industry revenue compared with 15.0% for Apple. The latter's market share reduced on account of the touch-screen factor becoming a common feature in low-cost alternatives by Samsung, LG Electronics Inc. and Lenovo Group Ltd.

Apple's loyal customer base, international expansion and a solid cash position are expected to aid long-term growth. However, increasing competition from the likes of Google GOOG, Hewlett-Packard HPQ and Microsoft MSFT in most of its major product segments and higher operating expenses are headwinds.

Currently, Apple has a Zacks Rank # 3 (Hold).