Samsung stocks plunge on US ruling

While it’s premature to debate the true cost of Samsung Electronics’ recent legal setback in its intellectual property dispute with Apple, one could say at least it is roughly more than $11 billion.

That’s how much the Korean technology giant lost in its stock market value on the first day of trading here after jurors in San Jose handed a lopsided victory to Apple. Apple had accused Samsung of copying the look and feel of its iPhones and iPads.

Samsung’s price per share tumbled by more than 7 percent to end at 1.18 million won, dropping its market capitalization to 174.8 trillion won (about $154 billion) from last week’s 187.8 trillion won.

Company officials are concerned that more investors will unload their holdings in the world’s largest maker of mobile phones and televisions over anticipation that the U.S. rulings will have an influence on litigation elsewhere.

Samsung and Apple have been launching lawsuits back and forth since early last year when Apple accused its Korean rival of making copycat smartphones and touch-screen tablets. Samsung countered with its own suits claiming that Apple infringed on its wireless technology patents. The lawsuits between the two companies have now spread to 10 countries.

A less robust Samsung is also a concern for bourse operators. Despite subduing economic activity and a bad economic environment, the benchmark Korea Composite Stock Price Index (KOSPI) has so far managed a slight annual gain.

Take Samsung out of the equation, however, and KOSPI ends up with about a 6 percent year-on-year decline.

“The ruling in California was enough to hurt Samsung’s entire brand image and may force investors into a wait-and-see mode,’’ said Lee Jeong, an analyst at Eugene Investment.

Apple’s upcoming new iPhone, which may or may not be named the iPhone 5, will also hurt Samsung in the market share department.

“There is a possibility that Apple will seek a sales ban on Samsung’s new Galaxy S3 smartphone, which wasn’t included among the targeted devices in the recent trial. Whether it manages to yank these phones off shelves or not, the release of the new iPhone will certainly burden Samsung and strengthen the downward momentum of its stock prices,’’ said Park Hyun, an analyst at TongYang Securities.

The decision in California could lead to the prohibition of Samsung smarphones and computer tablets in the United States. A hearing on the matter is scheduled for September 20.

Samsung’s top brass including the firm’s corporate strategy office head Choi Gee-sung and mobile chief Shin Jong-kyun are currently in emergency meetings to prepare “Plan B.’’

The verdict from San Jose, where jurors awarded Apple over a $1 billion in damages, was the company’s “worst case scenario,’’ one company official said. Samsung will appeal the decision, although a positive outlook seems rather challenging.

“We don’t think the damage amount will hugely hurt Samsung’s entire corporate value. If Samsung agrees to pay that amount, though chances are very low that the verdict will be fully accepted, then the operating profit for Samsung Electronics in the latter half of this year will be better than the first half,’’ said Kim il-tae, a fund manager at Taurus Investment .

Some investment analysts claimed that Moody’s decision to upgrade Korea’s sovereign debt rating will help slow the slide in Samsung’s stock price.

“Foreign investors usually change their investment portfolios capitalizing on countries which had been awarded a credit plus. It’s tough to gauge the intensity of Moody’s decision on Samsung stocks. But I’m confident the decision will offset worries of a `Samsung discount’,’’ said Ryu Yong-seok, a chief market analyst at Hyundai Securities, in a separate telephone call.

Samsung said the jurors’ decision will lead to fewer choices, less innovation, and potentially higher prices and expressed that it was unfortunate that the patent law could be manipulated to give one company a monopoly over rectangles with rounded corners, or technology that is being improved every day by Samsung and other companies.

Samsung plans to file a sales ban on Apple’s new iPhone and Samsung officials stressed that the company has key patents in the 4G-based long-term evolution (LTE) handsets, which are not essential but distinguishable.

“We don’t care too much about today’s trading results as it was widely-expected. Things will get better. Let’s see what happens,’’ said a high-ranked Samsung executive with a strong voice. <The Korea Times/Kim Yoo-chul>

news@theasian.asia