Plan B: Bada
David is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Samsung has built their Galaxy line of smartphones into bestselling Google (NASDAQ: GOOG) Android phones worldwide. Their Galaxy S smartphone sold 24 million units and its successor, the Samsung Galaxy SII, has sold 28 million units. The third iteration of the Galaxy line, the Galaxy SIII is one of the most anticipated phones of this summer. It has already racked up 9 million carrier pre-orders. Additionally the Galaxy SIII will be sold by all of the four major carriers in the United States, and US Cellular, under the Galaxy SIII name. Carriers will not be re-branding it and will not be mucking around with the hardware of the Galaxy SIII.
Samsung has also overtaken Amazon to be the second largest maker of tablet computers with their Galaxy Tab line, putting them behind only Apple’s (NASDAQ: AAPL) iPad. Samsung announced that after just five months on the market their Galaxy Tab line of tablets had sold 5 million units. A far cry from the 67 million iPads Apple has shown but still a good sales figure. Even the 5.3 inch experiment that is the Samsung Galaxy Note smartphone has had 7 million sales worldwide. There are rumors of a second generation Note launching this fall and Samsung hopes to sell ten million units in 2012.
Samsung’s new CEO, Kwon Oh-hyun in his first speech said that Samsung needs to invest heavily in software, user experience and design. This could indicate that Samsung is putting more weight behind their operating system, Bada, and their own services. This would allow Samsung to control every aspect of their devices, instead of relying on someone else’s software and services. Right now Samsung makes their hugely popular Galaxy S line, which runs Google’s Android and they have dabbled in Windows Phone smartphones. With Samsung’s huge hardware smartphone success, it is time for them to make their own platform of devices and services.
Samsung is already part of the way there with their Bada smartphone operating system. Announced in 2010, Bada is running on several Samsung phones. In late 2011 Samsung announced three new models running Bada 2.0. Not only does Samsung already have a mobile operating system but it is already maturing, with multiple versions of the software and hardware variants available. This means that some of the early bugs that any new system would have should be ironed out.
Apple produces all of its own hardware and software, creating a completely controlled environment. Samsung could be looking to replicate Apple’s success. Microsoft (NASDAQ: MSFT) also has a premium partner in Nokia (NYSE: NOK) putting other Windows Phone makers at a potential disadvantage. With Google’s recent purchase of Motorola it remains to be seen if this will create friction with Google’s other hardware partners. Google is also rumored to be launching a full line of stock Android devices under their own Nexus brand at their Google I/O developer conference. This would situate Google as a direct competitor with its hardware partners, like Samsung. Samsung has been working on Bada since before the Google Motorola acquisition; putting them in a good position should they want to launch Bada globally.
Samsung has to pay a licensing fee to Microsoft for every Windows Phone smartphone they sell, which makes Windows Phone a less attractive option. However Samsung also has a licensing deal in place with Microsoft pertaining to patent infringement. This means even Android smartphones involve a per unit payment to Microsoft. Microsoft is also getting into the hardware game with their newly announced Surface tablets. Microsoft building, branding and selling their own Windows tablets could have a chilling effect on third party hardware makers who had been planning a major push against the iPad once Windows 8 RT launched.
Overall it makes sense for Samsung to put more resources into their own controlled operating system. The trend, led by Apple is definitely toward more control and in house production. Microsoft has Nokia and their Surface tablets, Google has Motorola and their potential Nexus line of devices, and Apple has iOS. The largest players all are shifting this way. Staying in the highly competitive third party hardware maker and platform licensee business may not be the best model going forward for Samsung. They already have excellent hardware, combine that with their own operating system and services and Samsung could further differentiate their products.
The risks associated with a move like this include that the new platform fails to catch on, further fragments the mobile market, confuses customers and is a huge financial loss for Samsung. Research in Motion (NASDAQ: BBRY) has an operating system and services for their Blackberry smartphones. We have seen Research in Motions decline so there is no guarantee for Samsung that they could succeed with their own operating system. Samsung has recently teamed up with Intel for a potential merger of Bada with Tizen, Intel's open source operating system platform. This could see both Intel and Samsung pushing an Android alternative. A partial roll-out of Bada is the best path so Samsung can keep their Android success while building up Bada and Samsung services for a future global debut.
ded004 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, Microsoft, and Nokia. 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.If you have questions about this post or the Fool’s blog network, click here for information.