Apple and Samsung, lost in the Falklands

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via www.alanbirch.co.uk

I've been trying to wrap my head around the Apple-Samsung trial for a few days now. The more I think about it, the less sense the whole thing seems to make. Jose Luis Borges famously referred to the Falklands War as "two bald men fighting over a comb" - in essence, a war in which neither side had anything meaningful to gain or lose, except perhaps for their dignity. That feels like an apt description of the current battle raging in San Jose.

Putting aside allegiances to one platform or the other (full disclosure: I develop apps for iOS and Android, use a Galaxy Nexus for day-to-day, and think more competition is the only thing that will drive smartphone technology forward), I think there are three possible outcomes for the trial - none of which seems to really benefit either party.

  1. Apple "wins" and all Samsung devices named in the trial are banned. In the extreme best case scenario for Apple, they manage to ban sales of several Samsung devices that have either been on the market for months or weren't selling that well to begin with. This does nothing to impede the next generation of Samsung devices coming in the next few months, and probably doesn't dramatically damage Samsung's bottom line as they can still sell the devices in non-US markets.
  2. Apple fails to secure a device ban, but receives financial compensation from Samsung. Even if Apple secures the full $2.525 billion they are seeking, it's unlikely to dramatically impact Samsung. As the largest South Korean chaebol, and one of the largest companies in the world, they are particularly well suited to weather a $2.5B hit. Specifically, Samsung has more than 3x the assets of Apple ($384B to $116B), and took in more than twice as much revenue last year ($247B to $108B). Remember, they manufacture all sorts of things like TVs, printers, cameras, and yes memory and displays for Apple. Hell, Apple is estimated to be spending over $11 billion (or more than 4 times as much as they're seeking in damages) on Samsung parts in 2012 alone. Long story short, Samsung takes a hit on their stock for a few months but their balance sheet remains more or less solid.
  3. Samsung is cleared of any and all infringement. Not the likeliest of scenarios, but still worth exploring. While we might be encouraged to consider this a "loss" for Apple and a "win" for Samsung, that's not really accurate. In the absence of any pre-trial injunctions preventing sales, this decision represents a preservation of the status quo. Samsung's sales wouldn't increase as a result and Apple's wouldn't decrease. Everybody goes on their merry way.

So, in the best case scenario for Apple, they knock a few points off of Samsung's stock for a few months and prevent sales of a handful of last-gen devices. Perhaps they make Samsung think twice about the design of future devices, although I don't think it's likely. In the best case scenario for Samsung, nothing changes. They still can't match Apple's success or brand loyalty, and have to take comfort in being far bigger and more diversified.

At the end of the day no matter which of the above scenarios (or combination therein) comes to bear, not a whole lot is going to change between the two largest smartphone manufacturers in the world. Apple is going to continue to put out 1 incredibly well designed and engineered device per year with a tightly controlled ecosystem. Samsung is going to release as many phones as they can (for better or worse), and probably continue to be the flagship "nexus" manufacturer for Android phones for the foreseeable future. I think Apple is hoping they can set a precedent which will then enable them to go after other manufacturers, but I imagine if they thought they could win a case against anyone else using the same design patents they would have filed already.

Where does that leave us consumers? Spectating, trolling, and flame-warring while two bald men fight over a comb.

FWIW, I'm no expert. Just an exasperated bystander. Feel free to chime in if you think you have a better handle on things.