Stampedes are dangerous, but usually brief. Samsung’s shares were trampled
yesterday, falling 7.5 per cent as investors reacted to a California court’s
patent award in favour of Apple.

The rush for the exit presumably resulted from the usual herd dynamic:
everyone sold because they thought that everyone else would as well. No
surprise there – but the Won19tn ($16bn), or one-10th, wiped off of
Samsung’s market capitalisation since the case began appears to have
overshot the fundamental risks.

Small damage

Damage to Samsung, from a financial point of view, is relatively small.
Provisioning for the $1bn fine will knock about 4 per cent off this
quarter’s earnings, says CLSA. The hit to full-year numbers will depend on
which products Apple manages to get banned in a hearing next month.

But the phones that made up the bulk of the case contributed, at most, less
than a 10th of Samsung’s mobile sales and less than a 30th of its total
revenues, according to Bernstein.

And the case did not involve directly the Galaxy Note, its phone-tablet
hybrid, or the S3, its latest blockbuster smartphone. If Apple were somehow
to get these banned too, Bernstein says the total hit could take about 6 per
cent off full-year earnings.

Samsung’s corporate image is increasingly tied to consumer electronics,
particularly the Galaxy range. Those products’ strong branding is a
departure for a group previously happy making multiple unbranded versions on
demand.

Chip business

But pride aside, the company has a pragmatic core: if the S3 and Note were
excluded from Apple’s case on design grounds, as seems to have happened,
then it is already working around the toughest issues.

There are also its market-leading chip business - an important supplier to
Apple - to consider. While profits slipped in the most recent quarter, the
segment is solidly profitable and in investment mode. Yesterday ASML, the
Dutch chip equipment maker, announced Samsung would invest nearly $800m in
it alongside Intel and TSMC.

Life goes on in Samsung Town.

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