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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.

Fading star
So Samsung's challenges are many, including lack of customer loyalty, the costs of subsidy, its weakness in software design, the intense competition it faces, and its own damaged reputation. These challenges have analysts predicting that Samsung's mobile-device business will either grow "by a single digit" or "shrink mildly" in 2014, ending eight quarters of sustained growth.

Samsung faces a time of decision. Can it continue to build momentum by heavily subsidizing its low-end smartphones for the sake of market share, or is it time to consolidate its gains by crafting a unique market position and focusing on the customers it has fought so hard to find? Or will the company resign itself to playing a reduced part in the future of the smartphone industry, as others take their turn in the spotlight? Nokia, Motorola, Apple and hundreds of smaller competitors are eager to steal chunks from Samsung's hard-fought-for market share.

Samsung faces challenges it cannot easily solve. It has extended itself to a point at which its reach can only contract — good news for consumers eager for fresh competition to galvanize this important market, but not such great news for the company, or its investors.

Has the company's seemingly inevitable contraction already begun? We won't have to wait too long to find out, as Samsung apparently plans to introduce a new Galaxy device next week at the Mobile World Congress. While we can certainly expect a lot of media attention to greet the release, the real test will be sales: Will consumers invest in new Galaxy phones, will they migrate to handsets from Lenovo or Motorola, or might they instead choose to invest in Apple's currently popular iPhone 5S? Analysis of what customers actually do will tell us if Samsung's song is done, or if it has a few smartphone stanzas left in its lyric book. But problems certainly remain.


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