Wall Street Finds No Good for Google in Apple's Win

Photograph by Jim Wilson/The New York Times via Redux

Apple’s huge patent win over Samsung on Friday has broad and important implications for the mobile industry. But it’s not just handset and tablet makers and the people who buy them that are affected by the historic verdict. On Monday, Wall Street got its first chance to show its reaction to the jury’s finding that Samsung willfully infringed iPhone and iPad patents and its decision to award Apple $1.05 billion in damages.

Shortly after the stock market opened Monday morning, Apple shares had already hit their highest price ever, $680.87, after closing at $663.22 Friday before the verdict was announced. Samsung’s stock dropped 7.5 percent on the Korean Stock Exchange, which equates to a loss of about $12.5 billion in market capitalization, Reuters reports. Google, whose Android software is used by the infringing Samsung devices, is also feeling some fallout. Its stock was down 2.41 percent to $$662.29 on Monday.

Based on what went down Friday night, Wall Street analysts are making their best predictions about the future of both companies. Here’s what some of them are telling investors on Monday morning:

J.P. Morgan Securities on what it means for Google:

“We believe the Apple Samsung patent verdict out Friday night after the close is a negative for the Android ecosystem as it likely puts more pressure on Android OEMs to clearly differentiate devices and it suggests the courts may be willing to tightly enforce software and design patents in the future. For Google and Motorola in particular, the ruling may help shape the development of future devices and also put more pressure on Google to increase Motorola’s market share in smartphones. We believe Google shares could see some near-term weakness on the ruling.

Barclays on the overall impact on Android:

“While the verdict is not a positive for Google and the broader Android ecosystem, we believe this event alone will have a minimal near-term impact on Android’s global momentum in the smartphone arena. However, we admit that a potential sales injunction against Samsung products could impact Android’s strength in the U.S. Although $1.05 billion in damages is a large sum, most of Samsung’s devices that were found to infringe upon Apple’s patents are older models, and, importantly, in our view, Samsung’s current flagship phone, the Galaxy S III, was not included.”

UBS on a new revenue stream for Apple:

“If Apple is successful in its patent cases to conclusion (appellate, district, Supreme courts, and U.S. President) and if it is willing to settle, we believe it could result in a royalty revenue stream—Apple calculated Samsung owed it $250MM in 2010 (on an estimated 25MM smartphones and 2MM tablets), assuming certain discounts. We think this amount would be higher in 2012 at that rate with Samsung having sold an estimated 50MM smartphones in Q2 alone (hence, even a lower rate could result in a royalty greater than $250MM/yr). We est[imate] that every $250MM in royalty revenue equates to roughly $0.20 in EPS, all else equal.”

Macquarie Equities Research on the Apple-Google relationship:

“We believe that this can and inevitably will impact the important search distribution arrangements between GOOG and AAPL (although the true financial impact remains unclear). The damaged relationship has already pushed Apple to find alternatives for maps and information providers related to Siri. We also view the fact that YouTube will not be a native app on iOS 6 (despite the fact that it is unclear if AAPL pushed or GOOG jumped and the fact that GOOG will likely see improved economics from YouTube without the native app) as indication of the frayed GOOG/AAPL relationship. We expect this type of fallout to reach the search business as well, possibly as early as with the iOS 6 release.

It could be that the lasting damage isn’t to Samsung. Google is indirectly affected by the verdict against Samsung, and the company is feeling the impact anyway—not only on its stock, but perhaps in the future, too, with how its Android partners deploy its mobile software.

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