No, There’s No Samsung Death Watch

April 10th, 2014

The meme that has played out is that, since Apple’s profits have been relatively flat in recent quarters, and growth has slowed, the company must be in serious trouble. Any day now, they will be forced to fire Tim Cook and find someone, anyone, with a vision, to move the company forward. Meantime, Apple’s biggest rival, Samsung, a manufacturing conglomerate from South Korea, is on a tear and is taking over the smartphone world.

Or at least that’s what the critics say.

Yet it seems as if Samsung isn’t quite the juggernaut some have suggested it might be. But this goes back to the days of the introduction of the iPhone 5 in 2012. Some overeager financial analysts suggested that Apple would sell as many as ten million units the first weekend, with no actual evidence to back up that claim. When Apple sold half that number, a record for the company or any company making smartphones, that was sufficient to indicate the iPhone 5 was a big failure in the making.

This illusion played out in the ensuing months. There were alleged supply chain reports that had it that Apple had seriously cut production of the iPhone 5 after the 2012 holiday quarter due to reduced demand. It wasn’t for a moment considered that demand after a holiday quarter is usually less, and production would be adjusted accordingly.

During one of Apple’s quarterly conference calls with financial analysts, Tim Cook gently — perhaps too gently — explained that you cannot take one or two supply chain metrics, even if true, and assume the indicate the whole picture. It’s not as if the critics paid attention. The same story was repeated, and the stock price continued to drop.

When some analyst sales estimates weren’t quite achieved in a quarter or two, it was evidence anew that Apple was in serious trouble. Demands grew in some quarters to dump Cook, the supply chain genius.

Certainly, many Apple decisions were regarded as just plain wrong. It started with Apple’s decision to ditch Google and deliver their own Maps app. Early defects, typical of a 1.0 release or a late beta, only helped support the assumption that Apple had lost it. That many of the early problems have since been resolved didn’t matter.

And then there was the release of the iPhone 5s in 2013. Rather than sell the original iPhone 5 for $100 less as a cheaper alternative — and maybe confuse customers with a near-identical looking product — Apple decided to release an all-new model with mostly similar hardware and capabilities, the plastic-clad iPhone 5c.

But it was deemed a failure because so many more customers went for the more expensive flagship model. That raised the average sale price, so it should be a positive development. That the iPhone 5c still ended up among the top three best selling smartphones at carriers in the U.S. also should have been a good thing, but it wasn’t.

Unless Apple changed its ways, it risked losing big time to the Samsung juggernaut.

But is Samsung really doing as well as the critics suggested?

Take the Galaxy S4, which arrived in the spring of 2013 with lots of hype. The iPhone 5 was toast, since it had a smaller display and fewer features.

But Samsung’s smartphone didn’t quite do as well as all the positive publicity suggested. Some 10 million units were sold in the first four weeks, compared to five million iPhones in a single weekend. According to published estimates, the Galaxy S4 was beaten in the holiday quarter by that failure of a smartphone, the iPhone 5c.

What’s more, Samsung’s latest financials do not quite indicate stellar growth in sales and profits. So we have the announcement this week that the company’s operating profit dipped for the second quarter in a row. It also appears that the Galaxy’s S4’s successor, the Galaxy S5, is regarded as, at most, a modest update, and sales in South Korea are reported as slow. You’d think that Samsung needs to succeed in its home country.

Reviews haven’t been so stellar either. Although the Galaxy S4 got high marks, sometimes better than the iPhone, the Galaxy S5 isn’t getting the love. The most significant new feature, a fingerprint sensor that you swipe rather than touch, isn’t quite getting the love from the critics. Indeed, direct comparisons indicate that the iPhone 5s, whose Touch ID isn’t quite perfect, is a far superior solution.

Otherwise, the Galaxy S5 has a few new features, but it’s also bigger rather than slimmer, which isn’t a good thing for a product that’s already large enough.

This appears to be fairly typical for Samsung, however. A feature might be added to a product without regard to whether or not it works as advertised. So consider that silly Smart Scroll function on the Galaxy S4 that wasn’t very smart and wasn’t very functional.

Sure, Samsung sells loads of smartphones, more than any other company, but a hefty portion of those sales are for cheap handsets that don’t deliver huge profits.

I suppose if Samsung suffers another loss in the courts over patent infringement, maybe the tech and financial pundits will take pause. Or maybe not. Those legal skirmishes will still be all about rounded corners.

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2 Responses to “No, There’s No Samsung Death Watch”

  1. BoyGenius says:

    Two straight quarters of declining profits- there should be one.

    Apple continues to diversify its suppliers.

    Apple may even get into the TV business.

    Samsung’s doomed!

  2. Elmor says:

    Well, this is a dose of refreshing reality.

    Thank you.

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