Apple spent $1.75 million to go after Samsung's 35% gross margin, its lawyers counter with iPhone supply shortages

Apple spent $1.75 million to go after Samsung's 35% gross margin, its lawyers counter with iPhone supply shortages
Apple's accountant witness Terry Musika revealed some very important data about Samsung sales yesterday during trial. The Koreans were said to have sold 87 million mobile devices in total from mid-2010, when the Galaxy line was introduced, to March of this year.

22.7 million of those, that brought Samsung $8.16 billion in revenue, are found to be infringing on Apple's claimed patents. Terry Musika and his team estimated Samsung to command 35.5% gross profit margin on this revenue, thus arriving at the conclusion that "all your profits are belong to us" with the up to $2.75 billion of damages request.

Of course, Samsung lawyers argued that even if its gadgets are found to be infringing on Apple patents in the end, not all of them would have broke alll of the submitted patents at once during their sales cycle, so the damages are likely to be substantially less, but the interesting take from the story is the 35.5% gross profit margin that Samsung allegedly commands on its mobile devices.

Given that Apple's gross on the iPhone can hit up to 60%, and that Samsung doesn't sell much tablets compared to its smartphone sales to bring down the margin, this means that overall Samsung has been more conservative with its profit charges than Cupertino in that period. Apple's witness Terry Musika said that these calculation are not "just me sitting on a desk with a calculator", but they are derived from "literally hundreds of millions of calculations" by a team of 20 analysts, programmers, statisticians and economists that arrived at the $2.5-$2.75 ballpark estimate of infringement due by Samsung. Apple has paid $1.75 million to the team for this number-crunching, added Mr Musika.

Samsung, on the other hand, argued that the $8.16 billion worth of mobile device revenue from June 2010-March 2012 don't mean that Apple has missed on the exact same amount of iPhone and iPad sales, and not only because people could tell the difference between an Apple and a Samsung gear, but also because Cupertino simply couldn't produce that much more handsets and tablets to sell in the period.

Bill Price, Samsung's attorney, directly asked Terry Musika: "Apple couldn't service its own customers with the iPhone 4, but it could service customers it didn't have?", referring to the production shortage that the iPhone 4 experienced from July to October 2010.

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30 Comments

1. mercorp

Posts: 1045; Member since: Jan 28, 2012

This is stupid money wasted.that should have done apple a whole lot of RaD.

22. joey_sfb

Posts: 6794; Member since: Mar 29, 2012

You finally wise up.

2. frydaexiii

Posts: 1476; Member since: Dec 01, 2011

The more Apple argues, the more it's obvious they aren't after Samsung for infringement or "copying" them. It's all about Apple being unhappy that someone is stealing their thunder...So unhappy that they'll demand 2 bil just because "We started this whole smartphone shin ding , so it's still our profits you're earning". And what does how much they spent calculating how much of Samsung's profits they should have got to do with the case? P.S. It's great to be back, couldn't take that one week staying silent while Taco trolled all the Android articles...

4. good2great

Posts: 1042; Member since: Feb 22, 2012

haha... welcome back... he had a FIELD DAY!!! i imagined you, remixfa, and Sniggly were reading the articles wanting to reply SO BAD!!! lol funny thing is he ended up getting restricted a few days ago... now back to the apple bashing...lol gotta love this site... they don't support apple, the news is just released here so you guys can chomp at the bit...

7. MISTER.H

Posts: 167; Member since: Aug 03, 2012

You also forgot nonsequiter. EclipseGsx. TROLL. Taco.

28. JC557

Posts: 1919; Member since: Dec 07, 2011

Wow, what kind of comments did you guys make to warrant a ban or warning? I post quite a bit bashing Apple's idiocy and hipsters.

29. Sniggly

Posts: 7305; Member since: Dec 05, 2009

The final offense that resulted in my ban was me calling Taco a dumbass, in the middle of a post telling him that there was no way he could know more about the nature of phone sales than the people who actually sell the phones.

30. remixfa

Posts: 14605; Member since: Dec 19, 2008

i think it was because I called him a moron (on more than one occasion, thats normally what my warnings are for :) ) while completely turning his argument on his head like normal. You can only take so much. Notice how calm the boards are without him around? Yes, it was very interesting to see just how long he got away with acting like a complete fool on the boards before they finally banned him... yet again.. for like the 15th time. I think it was him going of on Michael that was the final straw. No need to "apple bash". Try to stay fair. Even while staying mostly fair Apple does enough dirty deeds to keep the comment sections flowing. I really dont get how anyone blindly accepts all that this company does. Between worker conditions, deaths, suicides, blatant copying, gleeful admitting to copying, and suing the entire industry over the weakest of arguments.. seriously.. The dont do all bad, but they do plenty enough that even an even-keeled person would think they were a bad company.

24. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

Sounds like Apple spent $1.75 million trying to get their damages calculation to 'fit' a particular endpoint (screw Sammy with a huge damages number). Posner already threw out such a peculative damages theory in Apple v. Motorola. Sounds like Apple would ave been better off spending the $1.75 million on engineers to design a new UI for iOS.

3. xtian1103

Posts: 364; Member since: Feb 11, 2012

"Of course, Samsung lawyers argued that even if its gadgets are found to be infringing on Apple patents in the end," -are they sensing it?

5. jove39

Posts: 2147; Member since: Oct 18, 2011

Yeah...seems like Samsung is in damage control mode now! Have you heard MS has struck deal with Apple for their ridiculous rectangular patents...this might give Apple some courage to pound on Samsung!

6. ibap

Posts: 867; Member since: Sep 09, 2009

Apple would like the uneducated population to BELIEVE they invented the smartphone. As an old (take that however you will) user of devices ranging back to the Palm Pilot and Treo phones (Palm and Windows), it is clear that is all hogwash, but their media machine will continue to make that case. Is there a chronological museum somewhere that Samsung could make use of?

11. pegasso

Posts: 285; Member since: Nov 27, 2011

8. OpIvy03

Posts: 2; Member since: Aug 14, 2012

Ibap I believe they have tried to enter some evidence that would show that they indeed had a phone or someone had created a similar looking phone to the iPhone before the iPhone was ever thought of but the judge prevented it. Lame lol. So Samsung pulled that little stunt with the press by releasing it to the public That's Apple's proven track record and strategy to their business. They bury the competition in legal paperwork until they win because they don't want to lose any market profit. There is no fairness with them they would like to take out the comp with money and drive the market to only use their products. Its similar to monopoly without the undercutting of prices. One market to own is all they want.

9. tluv00

Posts: 134; Member since: Oct 18, 2007

Hundreds of millions of calculations done by 20 people? Wouldn't that result in hundreds of millions of potential results and variations? This s**t is ridiculous. It really is and it's not going away anytime soon.

13. OpIvy03

Posts: 2; Member since: Aug 14, 2012

Exactly they had to run calculation and sort through answers until they found the right answer that would give them a number they couldn't refuse. Where are the rest of the test results and why was this one considered the winning answer?

26. structureman116

Posts: 142; Member since: Sep 14, 2010

It seems to me like this Terry Musika guy is another witness getting paid by Apple to blow BS through the court room. Hundreds of millions of calculations by 20 people? At just 100 million calculations, 20 people would have to average a new calculation every 6-7 seconds over the course of a year just to reach that volume. Apple is full of horse $h**!!!

10. whysoserious

Posts: 318; Member since: Jul 20, 2012

Samsung Attorney: Apple couldn't service its own customers with the iPhone 4, but it could service customers it didn't have? Terry Musika: ..okay T_T

12. PapaSmurf

Posts: 10457; Member since: May 14, 2012

$1.75 million... Jeez that's a lot of money. If you paid me with that kind of money, I'll be more than happy to say that Apple is right in what they're doing and Samsung copied them. :)

16. SlimSoulja86

Posts: 660; Member since: Nov 03, 2011

honestly speaking... me too

25. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

That is why 'experts' are nothing more than high-paid hos.

27. structureman116

Posts: 142; Member since: Sep 14, 2010

That is exactly why witnesses should not be able to be paid to participate in a trial!

14. SlimSoulja86

Posts: 660; Member since: Nov 03, 2011

Wow that's a lot of money for number crunching. Couldn't they they use that to donate to some charity.

15. iamcc

Posts: 1319; Member since: Oct 07, 2011

LOL!!!!!! I love a good laugh in the morning.

17. MISTER.H

Posts: 167; Member since: Aug 03, 2012

Apple I think don't donate nor give charity nor sponsor nor do you see advertising on billboards.

18. frydaexiii

Posts: 1476; Member since: Dec 01, 2011

I would think Apple would rather burn the money to show how rich they are than donate it to charity and show how rich and kind they are.

19. iamcc

Posts: 1319; Member since: Oct 07, 2011

I think Tim Cook probably sits up in his office with a stack of crisp $100 bills. He takes one, pulls out his pen, and writes... "Dear Steve, Android market share has grown even more. Instead of actually putting money into R+D like anyone with a brain would do, i'm writing notes to you on $100 bills and throwing them out the window. I think that's a better way to spend our time and money. Sincerely, Tim"

20. remixfa

Posts: 14605; Member since: Dec 19, 2008

that's only because 1000 bills are bank note only now. lol.

21. remixfa

Posts: 14605; Member since: Dec 19, 2008

what I love is that Apple is demanding every red cent that samsung made. but yet, according to their own calculations (however they magically came up with this), they lost 2 million iphone sales to the galaxy... even though there was an iphone shortage anyways.. lol. so.. they want 2 BILLION to make up for 2 MILLION iphone sales lost. umm.. thats $1000 cash per "lost phone" of pure profit. Even if Apple could somehow claim that they "lost" 2 million in sales 60% of 600 = 360 per iphone X 2,000,000 = $720,000,000 in lost profit, which is gargantuan but a far cry from 2 billion. And they could NEVER prove they lost 2 million in sales. They would have to poll every SGS1 customer and ask "did you really mean to buy an iphone instead of this SGS1?" and find 2 million people that said yes... or at least enough that they could claim statistically that it equals 2 million people. Never gonna happen. Like normal Apple is greedy, over reaching, over demanding, and pompous.

23. Sniggly

Posts: 7305; Member since: Dec 05, 2009

I love the singer at the end: "s**t, son, even if we weren't here to sell phones, your stupid asses couldn't have sold enough phones to satisfy those customers anyway!" It's true. Apple's case is ludicrously overreaching. They cannot reasonably claim that all of the "infringing" handsets' profits must go to Apple.

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