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Has Samsung stalled?

Jonny Evans | Feb. 19, 2014
The smartphone giant's troubles are deeper than its big drop in quarterly profits.

This means Samsung can either bet the future of one of its operating units on the Android OS, in which it has only limited opportunity for future software innovation, or emulate Apple's whole-widget approach by turning to Tizen. The latter move would give it control of software and hardware, but would demand that Samsung convert customers to a new OS that is as yet untested within the mass market.

Customer loyalty
Samsung would perhaps like to exploit customer loyalty to achieve a Tizen switch. But has it generated that kind of user loyalty with its Android devices?

Buried within various Internet usage stats are indications that it has not. They show that Internet access via Samsung Android devices is negligible in comparison to competitors' devices. It's illuminating that IBM reported that, when it comes to online shopping, the totals for iOS were "more than five times higher than Android, driving 23% vs. 4.6% for Android" on Christmas Day. True, "Android" isn't synonymous with "Samsung," but it's close; Samsung accounts for 63% of Android sales. Those IBM stats show that Samsung has failed to match the user experience of its biggest competitor.

More damning than that is the recent news that consumers are dumping Samsung devices for alternatives.

Meanwhile sales of its most recent high-end smartphone, the Galaxy S4, unexpectedly shrank in the fourth quarter, while Apple's device sales spiked. It is also revealing that 81% of iPhone owners stay with Apple when they upgrade their phones. Samsung smartphone owners are much less likely to remain Samsung smartphone owners.

These statistics suggest that Samsung does not have the loyal customers ready and willing to follow it to Tizen-based devices.

Loyalty becomes part of a company's reputation. Samsung Electronics has put its reputation on the line in its attempt to create its smartphone business. In the process, it had a very public falling out with its largest customer, Apple, leading to years of international litigation. Years into that struggle, Samsung's reputation seems permanently damaged by a series of successive decisions against it. In the U.S., it must pay $930 million to settle charges that it copied Apple's hardware.

Attempts to defend itself against Apple's litigation through the use of SEP-related patents have driven regulatory investigation against the Korean firm by antitrust authorities in Europe and the U.S. Meanwhile revelations of an online dirty tricks campaign against competitors have raised questions concerning the company's ethics.

And its problems will probably get worse when Apple turns the tables and "copies" Samsung by introducing iPhones with larger displays. "We think one of the key reasons Samsung has managed to take market share from Apple so far is its large-sized screen offerings," BNP analyst Peter Yu told Reuters, warning that the gap between the two could narrow if larger iPhones do indeed appear.


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