Apple Inc. and Samsung were in court on Monday to give their final arguments in a long design patent dispute filed before the Supreme Court. The Judges will give the final verdict by June 2017 but it appears that Tim Cook will be laughing to the bank at Samsung’s expense even before the final verdict. Samsung has announced that it will stop making the Note 7 “for the benefit of customers’ safety” barely two months after the release of the device.
The sad case of the exploding Samsung Galaxy Note 7 seems to have set Apple’s stock on fire. On Tuesday, the stock of the iPhone maker was up 1.7% to a high of $118.69 before ending the session at $116.30. In contrast, the shares of Samsung were down by as much as 8% during the session. Analysts have submitted that Samsung’s loss is Apple’s gains – this piece seeks to examine how much Apple stands to make from Samsung’s explosive woes.
Apple’s iPhone 7 demand to surge as Samsung stops making Note 7
Apple and Samsung are the two major rivals in the global smartphone market. iPhones running iOS is on the one hand and Samsung devices running Alphabet’s Android OS on the other hand. Samsung leads on market share with a 22.4% market share in Q2 2016, which dwarfs Apple’s 11.8% market share. However, Apple leads in terms of profits with its premium-pricing model and the iPhone maker takes about 90% of the profit margins.
However, the case of exploding Samsung Galaxy Note 7 is already forcing Samsung to lose market share to iOS. When the Note 7 started exploding, Samsung issued a global recall and it replaced the first batch of the devices. However, the explosions haven’t stopped and the replacement devices caught fire as much as the first batch of devices. Hence, Samsung issued a warning to Note 7 buyers to switch off their devices NOW and it announced that it has stopped making the ill-fated device.
Now, CFRA Research analyst Angelo Zino submits that Apple could gain a 1% market share in the wake of Samsung’s problems. In his words, “the biggest U.S. carriers have also stopped selling Note 7 phones and will allow customers to replace with a different device… We see a more favorable competitive landscape and higher Android switcher rates for iOS over the next 12-18 months.”
Here how much Tim Cook might make from Samsung’s troubles
Apple’s iPhone sales have been slowing down in developed markets in the last two quarters because of saturation in the markets. In fact, CEO Tim Cook has revealed that “switchers and first-time smartphone buyers represented the lion’s share of our iPhone sales in the quarter.”
However, analysts note that the 1% market share gain accruable from Android switchers could help the Apple sell about 15 million more iPhones. Hence, the firm’s iPhone sales might outperform the consensus estimate of 45 million units in the third quarter.
More so, analysts have forecasted that Apple’s Q3 2016 revenue will be about $27.6B down from $32.2B in Q3 2015. However, the Q3 2016 Average Selling Price (ASP) of the iPhone is $595. Hence, a 15 million upsurge in sales suggests that the firm could potentially record an $8.9B increase in revenue.