Apple vs. Samsung Who Is the Winner?
The recent ruling in the patent lawsuit in favor of Apple Inc. (NASDAQ/AAPL) against Samsung Electronics Co. Ltd. (KRX/005930) is seen by some as a big blow to Samsung. Technology stocks are constantly innovating, and I think market sentiment is missing the picture in this case. While Samsung did infringe against Apple and it is going to have to pay over $1.0 billion as part of the penalty, let’s take a look at technology stocks in this sector and see if there are any opportunities due to mispriced market sentiment.
First off, let’s not overthink the situation. Apple is a clear beneficiary among the technology stocks in the mobile phone sector. Market sentiment is, of course, extremely bullish of Apple, which makes entering a new position at these lofty levels quite dangerous. Stock price aside, technology stocks might approach research and development in a slightly more conservative manner now that they know how litigious Apple will be. Market sentiment will continue to remain positive, but I would wait for a pullback and a more attractive entry option in Apple.
Samsung is not traded in North America, but among technology stocks, it is clearly building a huge amount of momentum. It will appeal the ruling, no doubt, but even if it is not successful, I think the market sentiment if far overdone in this case. This patent case was for older handsets of Samsung. It does not include the best-selling Galaxy SIII. Older models have seen a huge fall-off in sales anyway, so the real hit is far less than market sentiment is indicating. If the current ruling holds, Samsung will lose approximately 1.4% of profits for the phones that are to be scheduled to be banned. Compared to the sell-off in the stock price, market sentiment was far over-exaggerated. Don’t forget; this does not apply to any new devices, and Samsung will adjust future products accordingly. Its massive gains in market share shows that it certainly does have its finger on the pulse of the consumer among technology stocks.
Some reported that other technology stocks, such as Nokia Corporation (NYSE/NOK) perhaps, might benefit. While Nokia does have a new lineup with “Windows 8” mobile operating software coming out, I really don’t think that a 20-year-old will decide not to buy a Samsung phone because older models might have copied a patent and instead look to a Nokia phone. Perhaps Nokia can compete on price or as an alternative to Apple and Android, but the gains will be marginal. Also note that the stock has run up significantly from the lows of the year; market sentiment is not as negative as it was in July.
Another of the second tier technology stocks is Research In Motion Ltd. (NASDAQ/RIMM). Market sentiment has battered this company for a long time. With other technology stocks so far ahead in terms of what their software can offer, I’m not sure RIM has a chance to regain anything close to what it once held in terms of market share. Sure, I think there’s a place for the company in the segment, but I would be careful about betting too much on a market sentiment rebound. We need to see how their new software will perform before any real analysis can be made.
Overall, I would look to technology stocks that are related to Apple. Component makers are one way to play technology stocks in this segment. The problem is that so many have such a bullish market sentiment that it’s dangerous stepping into the market now. With September being one of the worst trading months of the year, I would be cautious about accumulating too many technology stocks right now. Wait for a shift in market sentiment, and try to be opportunistic.