Despite big fine, Samsung shows assertive stance

• Rolls out assertive marketing against rival Apple as sales rise
• Leadership in Android market grows as competitors flail
• Company faces possible ban of certain phones

Few companies can be slapped with a billion-dollar fine and forge on undaunted.

That is seemingly the stance — at least publicly — chosen by Samsung Electronics, the South Korean manufacturing giant whose rivalry with Apple in products and words has boiled over in recent weeks.

In August, a federal jury found that Samsung had copied Apple's designs and technology in developing its smartphones, and the company was ordered to pay $1 billion in fines. Apple asked the court for an order that would remove eight Samsung phone models from store shelves and ban them from the U.S. A decision on that request is pending.

While accountants in Seoul may be wringing their hands, Samsung has put on a buoyant public face in the U.S. as its new phones packed with innovative features continue to gobble more of the domestic market share.

The marketing change is perhaps best reflected in a series of recent ads — timed for the release of Apple's iPhone 5 last month — that poke fun at customers lined up outside an Apple Store and eagerly anticipating what Samsung considers to be only incremental changes. In the ad, Samsung phone owners, all young and hip, are shown casually lauding features in the new Galaxy S3 model that aren't available on iPhone 5.

"We're owning our innovation story," says Todd Pendleton, chief marketing officer for Samsung Mobile USA, in explaining the ad. "You're seeing our brand in a way that you haven't seen it before."

Its sales data also partly explain the company's defiant marketing message. Despite the jury verdict and launch of the iPhone 5, sales of Galaxy S3 have been robust. From Sept. 11 to Sept. 17, sales of S3 rose 15% from the previous week, according to mobile research firm Localytics. Apple announced the iPhone 5 on Sept. 12.

Samsung declined to confirm the figures, but the company said in September that sales of S3 surpassed 20 million units in the 100 days after its debut in May.

And earlier this month, Samsung reported a record quarterly operating profit of $7.3 billion, nearly doubling last year's figure, largely on the strength of Galaxy smartphones and tablets and TV sales.

The commercials — part of Samsung's "The Next Big Thing" campaign — are a hit, too. One clip was viewed more than 16 million times on YouTube, Pendleton says, adding that the ads were designed to showcase Samsung's "innovations" and are part of the company's "coming-out party in North America."

David Stewart, a marketing professor at Loyola Marymount University, says "comparative advertising" can often be effective in winning over customers who aren't brand loyal. "Comparing yourself to market leaders suggests 'We're here to stay, ' " he says. "But they're not going to influence the hardcore Apple aficionados."

Android impact

Samsung's surge also has had a topsy-turvy impact on the market for Android, Google's mobile operating system, which is the main competitor to Apple's iOS.

With chief competitors in the Android market flailing — among them LG, HTC and Motorola — Samsung has consolidated its Android market leadership with timely products sold by all major U.S. carriers at various pricing points.

"I love their pricing strategy," says Ramon Llamas, an analyst at IDC. "You pay (a bit more) for a midtier phone, but you get a few more features."

In the first half of this year, Samsung's smartphone share in the U.S. grew to 27% from 12.5% in the year-ago period, according to research firm IDC. All other Android phone makers' shares fell during the period.

Apple, still the overall market leader, was the only other manufacturer whose share grew during the period, 37.3% vs. 27% in 2011.

Samsung's position in the Android market could have long-term implications for the company, because Android is the most popular mobile operating system in the U.S. Nearly 70% of smartphones worldwide ran on Android in the second quarter, up from 46.9% a year earlier, according to IDC.

"The market has condensed to two ecosystems," says Avi Greengart, an analyst at technology research firm Current Analysis. "Samsung is trying to take on Apple and differentiate itself from other Android (makers), and they're doing extremely well. If you're looking for an Android device, they want to be the first place you look."

Operational issues

To be sure, daunting operational issues remain for Samsung, not the least of which is the prospect that eight models, including the popular Galaxy S2, will be taken off the market unless the company can win an appeal later this year.

Apple, smelling blood, has also asked the court to ban two versions of Galaxy S3, as well as the Galaxy Note and Galaxy Note 10.1 tablet.

"Samsung is so successful that they can afford $1 billion in judgment," Greengart says. "Other competitors would have been wiped out. But in terms of the product ban, that would hurt Samsung."

Still, Samsung is pushing forward in its typical speedy fashion, recently announcing Samsung Note II, which has a 5.5-inch screen, and the 4-inch "mini" S3.

"This momentum we have is going to continue. We plan to be very aggressive in the market," Pendleton says.