Samsung knocks it out of the park
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As of the first quarter of 2012 Samsung (005930:Korea SE) ended Nokia’s (NYSE:NOK) 14 year run as the largest phone maker in the world according to Strategy Analytics, Samsung shipped a whopping 93.5 million phones in the first quarter of which 44.5 million were smartphones. Nokia shipped 82.7 million phones during the same time, these are shipment numbers not sales numbers but Samsung’s numbers are still impressive, especially the fact that nearly half of their phone shipments globally are now smartphone shipments. According to another report from IDC Samsung had 29% of smartphone shipments in the first quarter of 2012, Apple (NASDAQ:AAPL) had 24%, Nokia had 8.2% and Research in Motion (NASDAQ:RIMM) had just 6.7%.
Leading Samsung’s smartphone success is their Android powered Galaxy S line of phones. Thus far the Galaxy S, launched in 2010 and the Galaxy SII, launched in 2011 have sold over 50 million units. The Galaxy S sold 24 million units and the SII has sold 28 million units according to a Samsung press release. Even the experiment that is the 5.3 inch giant of a smartphone the Galaxy Note has seen impressive sales of seven million despite mockery over its stylus. This gives Samsung something that few other smartphone makers have, market power through their ‘Galaxy’ brand. This means that they may be able to dictate terms to carriers, such as not changing the names of their phones and not loading them up with bloatware. It additionally gives Samsung global brand recognition and positions them as the top dog within Android.
Currently Samsung is rolling out the third in their Galaxy S line, the Galaxy SIII. This new superphone has already racked up a reported nine million pre-orders from carriers and is confirmed to be coming to all of the big carriers in the US; Verizon (NYSE:VZ), Sprint, AT&T, T-Mobile and even US Cellular the sixth largest wireless carrier with just over six million customers is going to carry the SIII. What is even more key to this launch is that on all of these carriers the Galaxy SIII will be called the Galaxy SIII. Carriers will not be re-naming it or mucking around with it. This is the first time a Samsung phone has had this and it shows not only the power of the Galaxy brand that Samsung has built but also the fact that the carriers have realized the phone will be more of a hit with no additional buzz words added to its title.
With the Galaxy S T-mobile called it the Samsung Vibrant, AT&T called it the Samsung Captivate, Sprint called it the Samsung Epic 4G and Verizon eventually launched a total of three variants of the Galaxy S on their network called the Samsung Fascinate, Continuum and Stratosphere. All of these variants had slightly different hardware configurations and included software. With the Samsung Galaxy SII the brand fragmentation got somewhat better however AT&T still had three variants of the SII and one of them had a slide out physical keyboard and was called the Samsung Captivate Glide.
With the Samsung Galaxy SIII there are very few variants globally and in the United States all of the major carriers will be carrying the same variant under the same name. The largest difference between the US version and the international one is that the US version will have a dual core Qualcomm processor as opposed to a quad core processor on the international model. The US variant will also have 4G LTE support for carriers like Verizon who require LTE on all of their new smartphones. This uniformity in name and similarity in hardware will streamline support and updating for the SIII.
Additionally this will help Samsung compete against the iPhone. Apple sells the iPhone globally under the iPhone brand and with a new version of the iOS operating system rumored to launch soon and possibly a new iPhone the Galaxy SIII will need its global brand to keep Samsung as the number one smartphone maker. Apple has shipped well over 100 million iPhones as of 2011 and with a rumored deal to bring the iPhone to China Mobiles 650 million users Apple will be nipping at Samsung’s heels.
HTC (TPE:2498) is also launching its ‘One’ series of phones with the same target of a global line of smartphones under one brand with limited variants. Verizon however is not carrying the One series because it does not support 4G LTE, also Verizon likes to brand all of its high end Android smartphones under the Droid brand and only high end brands that have already proven themselves like the Galaxy or iPhone line get released on Verizon without the Droid branding and Verizon customization. Missing the largest carrier in the US and starting well behind Apple and Samsung with only 4.8% of the smartphone market will make it an uphill battle for the One series, which has received excellent reviews. Additionally there are three hardware variants of the highest end One device the One X, and Sprint has renamed their version the EVO 4G LTE, not the One X.
There are several other competitors entering the market with global brands, Microsoft with their Nokia partnership is pushing the Lumia line of Windows Phone smartphones globally and they have received good reviews, though their market share is still very low. Additionally Research in Motion has their Blackberry brand and though every carrier globally has different Blackberry devices the Blackberry brand is global and very well known. Research in Motion has their latest operating system Blackberry 10 launching later this year and this could breathe some life back into Blackberry. Blackberry had 6.7% of smartphone shipments in the first quarter of 2012, putting them ahead of HTC and making them the fourth largest smartphone maker globally.
There are rumors that at Google (NASDAQ:GOOG) I/O, Google will unveil a full line of stock Android devices under its Nexus brand that Google will sell directly and would be available on multiple carriers in many countries; this would create another global brand of Android devices for Samsung to compete with along with the HTC One series. Whether or not Blackberry 10 catches on and revives Blackberry, which still has 78 million paying customers or whether Microsoft gets Windows Phone’s market share above 3%, Samsung’s global brand, rising hardware margins (at roughly 20% right now) will maintain Samsung as the leader in smartphone sales.
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