The Seoul Central District Court of South Korea banned both Apple Inc. (AAPL) and Samsung from selling some of their devices, according to Bloomberg. The South Korean court ruled that both companies were guilty of infringing on each others’ patents.
The court banned the sale of Apple’s iPhone 3GS, iPhone 4, iPad 1 and 2 in the country effective immediately. However, iPhone 4S and the new iPad were cleared. Samsung also has to stop selling its Galaxy S, Galaxy S II and Galaxy Tab range of tabs although it can continue selling the Galaxy S III smartphones.
We believe that these bans will not have a significant impact on revenues of either company, as they are mostly on older products. Moreover, both have some exciting products lined up for release in the near-term that could very well offset the negative impact of the sales ban.
Interestingly, in the recently concluded quarter, Samsung derived 39% of its revenues from South Korea; whereas Apple’s revenue from the Asia-Pacific region was 22.5%.
Apart from the sales ban, the iPhone maker was ordered to pay 40 million South Korean won or approximately $35,000 to Samsung for infringing two patents related to “mobile-data transfer technologies”. Moreover, Samsung was ordered to pay Apple 25 million South Korean won or roughly $21,000 for violating one of Apple’s patents (“bounce-back” touchscreen feature).
Both the companies have been in trial in the U.S. and Europe over patent disputes. In the U.S., Apple sued Samsung for infringing four design-related patents and three patents relating to certain software. Samsung promptly counter-sued, accusing Apple of violating two mobile-technology standard patents and three utility patents.
Over the last couple of years, Apple has been highly vocal about saving its intellectual property from misuse and violations. The company has also been aggressive in filing lawsuits against other handset makers including Samsung and HTC, in order to protect its patents. Apple has accused these manufacturers of blatantly copying its iPhone and iPad designs. So far, these lawsuits have yielded mixed results for Apple. Although it won some cases against Samsung, Apple has lost a couple against Motorola and HTC. Recently, Apple suffered a setback when the ban on Samsung and Google Inc.’s (GOOG) Galaxy Nexus range of smartphones was lifted in the U.S.
However, Apple remains the biggest growth story based on its product pipeline, popular apps, iCloud, iPhone 4S, the new iPad, Apple TV and a loyal customer base. With a solid balance sheet and robust revenues, we expect Apple to outperform its peers in the long run.
We have a Neutral recommendation over the next 6-12 months. Currently, Apple has a Zacks #3 Rank, which implies a ‘Hold’ rating in the near term.
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