What Happens to Samsung Now?

By winning its patent infraction lawsuit against Samsung, Apple has "won," nearly every observer likely would say. Though it remains unclear precisely what could happen, there is another hearing scheduled for Sept. 20, 2012, on whether there should be a U.S.ban on sales of all 25 Samsung products that infringe Apple patents. 

Those devices include the Galaxy line and the Galaxy Tab, as well as 23 other devices. 

Since Samsung is the second most profitable manufacturer of smart phones, that would be a big problem. Few think that is the most likely outcome, though. The $1.05 billion damage award, if it stays at that level after certain appeals, will transfer a chunk of cash to Apple.

But Apple has lots of cash. The longer term outcome is some licensing royalty stream paid by Samsung to Apple, which will raise Samsung's manufacturing cost. Samsung also will have to create some work around processes. 

In all likelihood, the patent verdict also means other Android manufacturers will wind up paying royalties to Apple, as well. That will have the effect of raising manufacturing costs for all competing Android devices. 

Some believe the decision only highlights the broken nature of the current patent system that allows the patenting of operations and processes that should not be patented, but leave that aside, for the moment. 

Some optimists might argue that the long term damage to Samsung is containable, if Samsung can avoid draconian bans on importation of its products. Consider the lawsuit, the damage payment and future royalties as an alternative to Samsung having purchased all those patents directly. 

Consider that Microsoft paid $8 billion to buy Skype, and become a player in VoIP and messaging. It's hard to say right now how much the future licensing royalties might be. But consider the alternative: Samsung might alternatively have had to create a global, branded operating system, user interface and form factor of its own. 

Android, and the software and hardware tweaks it now will likely have to make, still will allow Samsung and other smart phone manufacturers to compete at far lower costs than would otherwise have been the case. Consider all the money spent on the Palm OS, Symbian or RIM OS. 

That is probably small consolation to Samsung. The tragedy would be if Apple's patent winnings were to somehow destroy Samsung's smart phone business at a time when Samsung has been able to win consumer allegiance, while making a profit, at levels no other supplier has achieved so far.