It was only a few days ago that we were absorbing the news of Apple’s (NASDAQ:AAPL) legal victory over Samsung in a patent dispute case that threatens to put a damper on Samsung’s Android smartphone sales. That news was also a big boost to Nokia (NYSE:NOK), which saw a 9% gain based on expectations that it could be a big beneficiary of the ruling.
Until now. Samsung just crashed that party.
Without missing a beat, Samsung unveiled the ATIV S smartphone, beating Nokia to the punch by being first to publicly announce a device running the new Windows Phone 8 operating system. Nokia was set to announce its own Lumia Windows Phone 8 smartphones — which were expected to be the first such devices revealed — at a joint press conference with Microsoft on Sept. 5.
And Microsoft (NASDAQ:MSFT) prominently featured the new smartphone on its Windows Phone blog, giving the reveal even more impact. Consider Nokia’s thunder officially stolen. The market reacted by shaving 2.5% off Nokia’s stock.
And after the ruling, U.S. consumers had reacted by buying up Samsung’s Galaxy III S smartphone (PCWorld reports some stores are now out of stock), fearful that the device might be banned as a result of the ruling.
But even if it is (and it’s not on Apple’s current list of devices it wants the judge to keep off U.S. shelves), they probably don’t need to worry, because it’ll be back. When a German judge banned the sale of the company’s Galaxy Tab 10.1 last September, it took Samsung all of two months to return with a tweaked version of the tablet. Problem solved.
And that’s why Samsung is so difficult to beat. Besides offering devices that consumers like (regardless of whether the design might shamelessly borrow elements from its competitors), the company is remarkably nimble in reacting to the market. Android is problematic? No worries, we’ll focus on Windows until that blows over. Our tablet looks too much like an iPad? No problem, we’ll add some silver to the bezel and move the speakers.
Even when consumers react poorly to a product, the company has a history of sticking with it, constantly improving the design, lowering the price and relentlessly muscling into a leadership position. It did this to Sony (NYSE:SNE) with flatscreen TVs and it did it to Nokia with mobile phones.
Compounding the challenge to Samsung’s competitors is the fact that the company offers an extraordinary range and depth of products. Competing against it is, in a way, like playing “whack a mole.” Except there’s a good chance Samsung manufactured half of the components used to make the mallet. For example:
- According to its website, Samsung currently sells 152 different mobile phones and 15 different tablets in the U.S. market alone. It’s the world’s largest seller of mobile phones.
- While Android is the operating system of choice in its top-selling smartphones, Samsung has also been developing and selling Windows-based phones. Although announcement of the new ATIV S Windows Phone 8 models put that fact in the spotlight, the company is currently selling four different Windows Phone 7 models.
- Samsung also trails only Intel (NASDAQ:INTC) in semiconductor manufacturing with nearly 10% of the world market. It’s also the world leader in production of memory chips. Apple (yeah the same company that sued Samsung) is the biggest customer of Samsung’s $13 billion yearly component business.
- Samsung is the world leader in LCD TV sales, with an 18% market share.
- South Korea has the world’s 15th largest economy and Samsung is responsible for one-fifth of its exports.
- Samsung also makes home appliances, computers, printers, cameras, stereos and other consumer electronics while its subsidiaries include shipbuilding, insurance and advertising interests.
Despite the fact that Samsung makes pretty much anything a consumer might want, the company is currently focused on smartphones, as they make up a very substantial chunk of its profit ( Samsung is the only mobile phone manufacturer besides Apple that’s figured out how to make real money selling smartphones). The company’s Q2 report showed that just one of those 152 different phones — the Galaxy S III — accounted for 60% of its profits.
And while the Apple ruling will cost Samsung some business in the short term, things still look okay in the long run. It will hone its products to be lawsuit-resistant and will continue to diversify so a setback on one platform isn’t life-threatening.
If there’s collateral damage along the way — like the sucker-punch just dealt to Nokia — well, that’s just business.
As of this this writing, Brad Moon did not own a position in any of the aforementioned securities.