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Samsung Drops After U.S. Court Blocks Nexus Phone Sales

Samsung Electronics Co. (005930), the world’s top handset maker, fell the most in a week in Seoul trading after Apple Inc. (AAPL) won a court ruling blocking sales of the Galaxy Nexus smartphone in the U.S.

Samsung dropped 2.3 percent, the most since June 25, to 1,174,000 won at the close of trading on the Korea Exchange. The stock was the biggest contributor by index points to the 0.1 percent decline in the benchmark Kospi (KOSPI) index.

Samsung has been fighting patent battles for more than a year with Apple, also the South Korean electronics maker’s largest customer, as they compete for leadership in the $219 billion global smartphone market. The latest U.S. ruling puts handset sales in a major market at stake for Samsung, as Apple has sought to bar as many as 25 Samsung smartphones, including the latest, the Galaxy S III.

“People are concerned that this could spill over to the S III, because if the same rationale applies to the S III, it’ll be a big blow to Samsung,” Shin Hyun Joon, a Seoul-based analyst at Dongbu Securities Co., said by phone. “This isn’t an issue that will conclude any time soon.”

Sales of the Galaxy S III, the latest version in Samsung’s best-selling smartphone series, started in the U.S. last month. Sales in America were the largest overseas source of revenue for Samsung last year, according to data compiled by Bloomberg.

Samsung appealed the ruling on July 1, Nam Ki Yung, a Seoul-based spokesman, said by phone today.

Google Search

The impact of the ban on the Nexus phone alone won’t be big for Samsung, as the model is estimated to sell fewer than 1 million units a year in the U.S., Shin said. Samsung, which doesn’t disclose shipment figures for smartphones and tablet computers, sold 44.5 million smartphones globally in the first quarter, topping Apple, according to market researcher Strategy Analytics.

The ruling by U.S. District Judge Lucy Koh in San Jose, California, follows her June 26 order blocking sales of Samsung’s Galaxy Tab 10.1 tablet in the country. On June 7, Koh expedited evidence sharing for Apple’s bid to block sales of Samsung’s Galaxy S III.

The Nexus phone, the first smartphone to run Google Inc.’s Android version 4.0, was unveiled by Samsung and Google in Hong Kong in October.

The disputed patent that led to the June 29 ruling involves a Google search function that shows results from multiple sources, and Samsung is working closely with the U.S. partner to resolve the ban, the South Korean company said on June 30 in a statement.

Rivalry Partnership

Google may be able to tweak its software to dodge the ruling, C.W. Chung, a Seoul-based analyst at Nomura Holdings Inc., wrote in a report today.

Samsung, the world’s largest maker of computer-memory chips and flat panels, may have more to lose in the dispute than handset sales as the company relies on Apple to get more than 7 percent of its revenue, according to data compiled by Bloomberg. Samsung is the exclusive manufacturer of Apple-designed processors powering the iPhone and iPad.

The iPhone maker will probably try to diversify away from Samsung to get parts supplies where it can, Shin said. NAND flash, a type of memory chips used in mobile devices, is one of the components Apple may seek to source elsewhere, while it will have to keep relying on Samsung to get processors, he said.

“Although Samsung is trying to run its component and consumer-electronics businesses independently of each other, it’s hard to say there won’t be any impact,” Shin said.

To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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