Apple Could Benefit by a Samsung Victory, Analyst

| Analysis

Steven Milunovich of UBS offered up a curious take on the epic patent battle being fought between Apple and Samsung. The hardware analyst told clients on Monday that if Samsung wins, the world of consumer computer could settle around Apple designs, keeping the company in the driver’s seat.

On the other hand, if Apple were to win, it could force its competitors to (finally) think outside of Apple’s box, which could lead to one of those competitors innovating their way around Apple. As such, Mr. Milunovich argued that losing its patent infringement case with Samsung could be a net win for Apple.

The Apple Copier Machine

Mr. Milunovich’s research note was sparked by a New York Times article that focused on the way that a verdict either way could reverberate through the tech world. In that article, intellectual property attorney Christopher V. Carani said, “I think what we’ll see is a diversification of designs in the marketplace if Apple wins.”

Michael Gartenberg of research firm Gartner said that conversely that if Samsung wins, “Expect to see an awful lot of Apple knockoffs without fear of retribution.”

From the research note, as covered by Forbes:

A standard view would be that allowing competitors to copy Apple designs will cut into Apple’s sales and margins. In the short- to intermediate-term, an Apple win forcing competitors to come up with different designs should be positive because Apple is a better designer and could have a monopoly on key features. In the long run, however, it could hurt Apple because the real threat is not a competitor beating Apple at its own game but instead changing the game. The likelihood of Apple being leapfrogged or a rival creating a new category is greater if they have to think out of the box. If they just copy Apple, like Coke, Apple can claim to be ‘the real thing.’

It’s an interesting take on the situation, but one that belies the reality that there has been little innovation by Apple’s competitors worth a tinker’s wind. This is true in the PC market, where the original iMac started Apple’s resurgence.

Some Apple competitors tried to innovate by copying the iMac’s design and were turned back by Apple’s lawyers, who sued over trade dress grounds. After several Asian copycats were turned back, PC makers turned back to towers and ugly all-in-ones that no one much thinks about.

In the laptop world, the PC market was left flat footed by Apple’s MacBook Air until Intel goosed the market with US$300 million in development funds to help PC makers try and innovate by copying the Air. That effort has resulted in PC makers better playing catchup, but no one has leapfrogged Apple yet.

In the MP3 player market, Apple rewrote the rules with the iPod. There were a few sad efforts to copy the iPod’s look and feel, but no leapfrogging innovation. That market is mature enough now that it’s not likely to change. Apple remains large and in charge in this shrinking market.

Of course, the smartphone and tablet markets have much more potential than either of those older markets, and more potential means more effort. Mr. Milunovich is right that if competitors are forced to be different that they could come up with something interesting, but the reality is that there is no culture of real innovation at most if not all of Apple’s competitor.

Without that culture, we think it doubtful that Apple is going to be leapfrogged in the foreseeable future even if competitors are forced to think differently. Android fans and Apple haters will no doubt take issue with that pronouncement, but history is on our side in this issue.

In our opinion, Apple being able to protect its innovations offers the most benefit to Apple. If a competitor does come along that can leapfrog Apple, the company will be forced to work that much harder to reclaim its advantage, and that’s the real win for us as consumers.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

Sign Up for the Newsletter

Join the TMO Express Daily Newsletter to get the latest Mac headlines in your e-mail every weekday.

10 Comments Leave Your Own

mrmwebmax

+

Steven Milunovich of UBS offered up a curious take on the epic patent battle being fought between Apple and Samsung. The hardware analyst told clients on Monday that if Apple wins, the world of consumer computer could settle around Apple designs, keeping the company in the driver?s seat.

On the other hand, if Apple were to win, it could force its competitors to (finally) think outside of Apple?s box, which could lead to one of those competitors innovating their way around Apple. As such, Mr. Milunovich argued that losing its patent infringement case with Samsung could be a net win for Apple.

Should the first paragraph read “if Samsung wins”??

Lee Dronick

Interesting perspective, invention being the mother of necessity and all of that. I know that I misquoted that old saw, but I like the way that it sounds. Speaking of liking how something sounds

but no leapgrogging innovation

That actually fits.

Bryan Chaffin

Thanks, mrm. The article has been corrected!

Thanks, Lee.

Tiger

Isn’t the point that Apple’s designs HAVE become the design standard already? grin

msbpodcast

Apple doesn’t care if somebody can out design it, anymore than Lamborghini cares if somebody can out design it, because they have seen no evidence of anybody capable of doing that. (Its a lot harder to copy a Lamborghini product that an Apple product, but don’t think for a minute that Lamborghini wouldn’t come down like a ton of bricks and sue the pants off of a clone maker.)

It keeps lawyers employed when people clone instead of innovating. Apple designs its own stuff and its immediately apparent that its an Apple design, because its like nothing that had ever been built that way before.

It got a majority of the MP3 player market because it designed the iPod, and then changed the way music is bought and sold.

It got a majority of the smart phone market because it designed the iPhone and leveraged its experience with the iTunes Music Store and the app store.

It got a majority of the tablet market because it designed the iPad, and leveraged the iTunes Music and app store, and book store.

It got a majority of the laptop market because it designed the MacBook, and then changed the way software is bought and sold.

It got a solid retail presence not because it had been treated so well by the big box stores, but because it had been treated so shabbily by them and if it wanted to ge its products out, it had to out innovate the retailers.

It is out innovating retailers again by moving away from cash registers and moving away from the concept of using specie in the transactions.

Meanwhile the PC market was hobbled by the PC price wars, by the accountants who work for the PC makers who out-sourced everything, resulting in the jobs of other accountants who work for winner in the chassis makers market, who supply card cages to the winners in the mother board makers, wo are so risk averse that they still produce motherboards with AT style keyboard and mouse connectors, despite the fact that they should have switched over to USB decades ago.

These people are so hidebound and scared of not meeting their quarterly sales figures with the razor-this margins left to them that the FIRE anybody who’d rock the boat with any design having anything near an innovative thought.

People who compete purely on price get rid of their design department early on, and get caught flatfooted when somebody else hang up a “Think” sign.

Jason

Apple doesn?t care if…

Almost all your claims there are patently false. Stop spreading misinformation.

maclover121

Apple doesn?t care if somebody can out design it, anymore than Lamborghini cares if somebody can out design it, because they have seen no evidence of anybody capable of doing that.

Other companies are out-designing Apple, including HTC and Samsung, and this is one of the reasons Apple is so keen to stop them through lawsuits instead through competition.

iJack

So according to this genius, the bottom line is, that Apple could claim to be “the real thing” if they lose?  Whoop-de-do!  And that “keeps them in the driver’s seat,” and is a “net win,” how exactly?

I’ve never encountered such laughable logic since my kids were in kindergarten.

i_newit

“On the other hand, if Apple were to win, it could force its competitors to (finally) think outside of Apple?s box, which could lead to one of those competitors innovating their way around Apple.”

Innovation like that which came after windows 3.0?

wab95

Bryan:

Mr Milunovich’s speculation has a certain logic in isolation, but, not unlike that of Karl Marx, fails to take into account observed human behaviour, in this case, the humans being Apple’s competitors.

Apple has a track record of taking disparate pieces of tech, and combining them in ways undreamt of by their competitors to make products, which while not necessarily the ‘first’ (e.g. desktop computers, desktop GUI, all-in-one desktop computers, MP3 players, smartphones or tablets) by their very natures are such brilliant re-conceptualisations of the product that they are both design patent-worthy and set the standard for the industry.

While the industry could, as you point out, in principle, think outside of the Apple box and leapfrog Apple (which would mean to come out with something so radical that no one else in the industry has conceived it - not even Apple - and not simply super-spec’d an Apple knock-off), precedent is not on their side.

I personally don’t think that a court verdict either way in this case is going to materially hurt Apple, nor do I believe that even the most casual observer is unaware of Apple’s trendsetting status and market leadership. Concurrently, I don’t believe that a court loss for Apple will make Apple’s products the industry standard that will ‘keep Apple in the driver’s seat’. A court room victory, on the other hand, could result in a decrease in real competition, to the extent that it exists, with competitors offering differentiated products for which there is little market and that do not sell well (e.g. MS/Nokia Lumina). In the long run, this might not bode well for Apple, as Apple might have no competition whatsoever, differentiated or imitative. Personally, I see that as a net loss for Apple and consumers.

A court room loss will result in the status quo: Apple’s competitors making knock-off products with minimal differentiation that will sell particularly well in low and middle income markets. The imitators will continue to imitate and protest their originality, and will sell products that are ‘almost’ the same as Apple’s.

In this scenario, Apple’s advantage will remain not simply its originality in design and performance, but the thing that its detractors often decry, namely its ecosystem, into which all of these products and services are tied, and which confers a level of product utility and function that Apple’s competitors have yet to replicate. However, Apple will hear the hoofbeats of its competitors and their ‘almost’ products and will be pushed to differentiate from the thundering herd. Consumers will benefit.

The best of worlds remains independent foci of innovation with differentiated products and services, but it has been a world seldom seen during the past decade.

Log-in to comment