Is Samsung Becoming a Threat for Apple

Anindya is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Samsung Electronics, the world’s largest maker of mobile phones and TVs, reported higher than expected fourth-quarter earnings as sales of Galaxy smartphones withstood the debut of Apple’s (NASDAQ: AAPL) iPhone 5. Samsung is by far the most important partner of Google’s (NASDAQ: GOOG) Android operating system. Not only does it dominate from a market share perspective, it's really the only Android OEM that is actually making lots of money. Is Samsung increasingly becoming a threat for Apple?

Samsung’s operating profit rose 89 percent to a record 8.8 trillion won or $8.3 billion in the three months ended December. That compares with the 8.5 trillion won average of 35 analyst estimates compiled by Bloomberg. Sales jumped 18 percent to 56 trillion won, helped by demand for Galaxy Note II and Galaxy S III phones. Samsung sold about 62 million smartphones in the past quarter, compared with Apple’s 45 million, according to a Daewoo estimate.

Samsung’s Galaxy Sales Have Been Impressive

Sales of the Galaxy S III reached 30 million units five months after it was introduced in May, Samsung said. The company is also profiting from its Galaxy Note II phablet (phone as well as tablet) device, introduced in September, which reached sales of more than 5 million units as of November, the company said.

Sales of Galaxy S IIIs may suffer this quarter ahead of the anticipated introduction of the new Galaxy S IV device in the following three months. Still, the company is expected to maintain its top position in the global handset market because of mid-end smartphone sales. “Samsung was the major beneficiary of slower-than-expected sales of Apple’s iPhone 5,” James Song, an analyst at Daewoo Securities Co. in Seoul, said.

Samsung Would Start Selling Tizen-based Phones

Samsung would start selling Tizen-based phones this year, Bloomberg reported. This could be at least in part due to Google's purchase of Motorola last year. Samsung has become a major player in the tech world because of its prominent presence in the Android ecosystem after Google. For maintaining its strong position in the tech world, the company is trying to explore the second option after Android, or hedging its bet with Tizen. Maybe there are several incentives for Samsung in doing so.

Samsung vs. Apple: 

In terms of revenue, Samsung is bigger than Apple. Its $190 billion revenue is nearly twice of $100 billion in revenue for Amazon, Facebook, and Google combined in 2012. But what’s on the profit front? Samsung’s $12 billion in profit for 2011 has turned closer to $20 billion in 2012. While it’s miniscule compared to Apple’s $55 billion in profit for 2012, it should be roughly twice of Google’s profit for the year.

Apple: Losing Ground?

Forrester Research is reporting that Apple will sell $39 billion in Macs and iPads through 2014. According to the firm's latest report, Apple will sell $7 billion worth of Macs and $11 billion in iPads to the corporate market this year and in 2014 they will sell $8 billion in Macs and $13 billion in iPads.

Apple's dominance in mobility and the market’s shift to mobile will make the enterprise work flow for getting work done one of the most highly competitive in the enterprise market. That's evident from the recent acquisitions in Bring Your Own Device (BYOD) market when Citrix acquired Zenprise and Dell acquired Cedant. Apple is also developing a workflow.

To counter Apple’s dominance, Microsoft (NASDAQ: MSFT) upgraded their operating system into a universal Windows 8 platform, which will support PCs, tablets and mobiles. By 2014 increased PC demand and improved Windows 8 devices will lead to a strong 8 percent growth for Microsoft’s products. But that growth will still be less than the double-digit growth for Apple and Android products.

The rest of the market pales in comparison. It’s absolutely not possible that Apple is losing ground and Samsung is becoming a threat for Apple. In fact Apple is bringing fundamental changes in the way people work and live. Samsung is undoubtedly becoming an influential player in the game, but Apple is leading from the front.

Anindya7 has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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