Shares in mobile phone firm Nokia leapt 10 per cent on Monday on hopes it can benefit from a setback to rival Samsung, which has lost a high-profile court case to Apple that could lead to an injunction against some of its products.
A U.S. jury found South Korea’s Samsung Electronics copied critical features of Apple’s hugely popular iPhone and iPad and awarded the U.S. company $1.05-billion in damages.
“In addition to Apple, we name Microsoft and Nokia as the main beneficiaries from this outcome,” said Nordea analyst Sami Sarkamies.
Nokia and its software partner Microsoft have been struggling to win ground from Samsung’s Android-powered smartphones which lead the market.
It remains to be seen if the new touchscreen-friendly and cloud computing-ready Windows 8 can prove a serious rival to Android, the world’s most-used mobile software, or Apple’s iOS. But mobile industry executives who had been cautiously considering Windows as an alternative to Google’s Android say Friday’s ruling had intensified their interest in a Microsoft alternative.
The key reason: fear of patent lawsuits from Apple.
The California company’s battle with Samsung was in large measure a proxy war against Google Inc.’s Android software, which is used by many manufacturers to run its mobile devices. The verdict could empower Apple to file more such lawsuits.
“Some of the other manufacturers of Android products like ourselves are prepared to face similar lawsuits from Apple,” a senior executive with a major Chinese mobile maker told Reuters on condition of anonymity as he is not authorized to talk to the media.
“The Apple-Samsung lawsuit has given us some reference point on our future innovation. We’ll focus on developing our own unique user interface based on the Android platform.
“Even though the bulk of our shipments run on Android, the trend is to diversify into other products running on Windows,” the executive added, predicting that the percentage of Windows-based smartphone shipments would increase significantly, from less than 10 per cent now to around a third over the next few years.
Google’s Android is used in around 65 per cent of smartphones sold globally, with Samsung the biggest maker of Android phones.
Nokia is now the largest maker of Windows Phones, but the market share of the software has stayed at below 5 per cent.
“We think that the real winner hear will be Microsoft and the Windows Phone ecosystem,” Nomura analysts said in a note.
“As Android and Apple tear each other apart, Microsoft has been waiting in the wings and is in a very good position to move in and entice users to switch from Android to Microsoft, as we have already seen that user loyalty is low,” they said.
Some analysts are skeptical that Microsoft can produce a device that the mobile consumer will love.
“Microsoft has been the beneficiary of this whole fight as the other non-Android option,” said Ron Laurie, a Silicon Valley-based specialist in IP and investment banking and co-founder of Inflexion Point Strategy. “But safety (from lawsuits) by itself is not enough. You have to appeal to consumers.”
And so far the market has seen that consumers want phones and tablets that look like Apple’s devices, he added.
Hardware manufacturers, mostly based in East Asia and known in tech industry jargon as original equipment manufacturers or OEMs, are weighing their options.
“From an OEM perspective, the verdict alone, and certainly an injunction on sales of any kind, levels the playing field between Android and Windows Phone,” said IDC analyst Al Hilwa. “At this point, the two platforms would have to fight on features and developer ecosystems to win.”
ZTE and Huawei, China’s two largest handset makers, declined comment. Both have announced plans to launch Windows-based phones to supplement their Android products.
“Smaller Android phone makers like (Taiwan’s) HTC, (Google’s) Motorola and Sony will have challenging times ahead,” said Seo Won-Seok,” a Seoul-based analyst at Korea Investment & Securities. “They’ll face increasing production costs and rising entry barrier to the Android ecosystem. They now face a great risk of similar litigation from Apple.”
HTC, once the Android market leader, has also struggled in lawsuits with Apple and lacks its own strong patent portfolio, making it vulnerable to further legal challenges. It has tried to rebuild market share with new models, the One series, that incorporate high-level photography functions and audio technology from U.S. firm Beats, in which it bought a stake.
“For all these manufacturers it’s a risk management game,” said Andrew Milroy, Singapore-based vice president of Frost and Sullivan, a consulting company. “They don’t want to put all their eggs in one basket.”
Shares in Nokia were 10.2 per cent higher at 2.746 euros by 0835 GMT. Microsoft’s European-listed shares were 1.6 per cent higher.
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