Apple (AAPL - Analyst Report) has reportedly received a favorable preliminary ruling from the International Trade Commission (“ITC”) in a patent infringement case against Samsung.
The ITC ruled that Samsung has infringed Apple’s patents on a certain “text-selection feature”. However, the ITC ruled out Apple’s allegation that Samsung violated Apple’s patent for the detection of a device when plugged into its microphone jack.
Now, the full commission will decide the patent infringement issue by Samsung in August. If it upholds the ITC judge’s decision, Samsung could face a sales ban of its Galaxy, Transform and Nexus devices in the U.S. The ITC has the capacity to block sales of disputed articles in the U.S.
Over the last couple of years, Apple has been highly vocal about protecting its intellectual property from misuse and violations. The company has been aggressive in filing lawsuits against other handset makers such as Samsung and HTC, and has accused these manufacturers of blatantly copying its iPhone and iPad designs. So far, these lawsuits have yielded mixed results for Apple.
The probable ban on many of Samsung’s devices in the U.S. will likely provide Apple the chance to regain some of the ground it has lost to its South Korean rival. In 2012, Samsung emerged as the leader in the smartphone market with 30.3% market share compared to Apple’s 19.1%. It is noteworthy that Samsung’s market share has grown 129.1% from the previous year in contrast to a 46.9% increase in Apple’s market share during the same period of time.
We believe that significant share gains by Apple will prove to be difficult given the stiff competition from Samsung both in terms of product launches and pricing of products. Other smartphone makers such as Nokia (NOK - Analyst Report), Sony (SNE - Analyst Report) and Research In Motion (BBRY - Analyst Report) are other contenders for market share.
We also believe that Apple’s ability to innovate and grow in developing nations, where the market is more cost-sensitive, will determine the company’s fortunes in the future. Moreover, Apple’s loyal customer base coupled with its solid balance sheet and robust revenues bode well.
Currently, Apple has a Zacks Rank #3 (Hold).