CNBC Stock Blog

There Are No Winners in Apple's Patent War: Analyst

Jennifer Leigh Parker, |Writer,

Applewon a patent lawsuit against Taiwan's HTC Corp over smartphone technology Monday. The case is seen to set the stage for future patent wars, which no one will ultimately win, says Daniel Ernst, principal at Hudson Square Research.

"This entire patent war in smart devices from mobile phones to tablets is complex," says Ernst.
"There's wire technology, memory tech, software tech — it's a big house of cards, and ultimately no one is going to win. They'll all end up settling out."

HTC is expected to adapt new Android software quickly.

Legal Victory for Apple

"By removing the feature it will be a less capable device. You can design around it, but its going to cost them money," he concludes.

Despite adaptability, the ruling did not come at a good time for HTC. Ernst says the company was already losing around 2 percent in market share, facing pressure on the high end from Samsung, and the low end from ZTe.

"That low end is going to continue to drive prices and margins down for everyone in Android land, despite the patents," he adds.

On the other hand, pricing pressure is not the same animal for Apple, whose iPhone sales are up 50 percent year on year, and whose stock trades at 11 times on estimated earnings in 2012.

Ernst explains: "At the end of the day, patents are great, but you have to have a really good product. Apple remains the single biggest selling phone."

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Neither Daniel Ernst, nor research firm Hudson Square owns shares of Apple.