Apple has elicited a lot of hand-wringing by investors and fans alike lately, even as its chief competition Samsung seems to be prompting nothing but applause. Turns out selling a wider variety of phones and tablets is a good strategy after all.
While Apple was on its way to the company’s first profit decline in almost a decade during the first three months of the year, Samsung’s net profit grew 42 percent in the same period to 7.2 trillion won - about $6.5 billion U.S. from 5 trillion won a year earlier. It was a record-setting quarter for the Korean consumer electronics maker. “Our business earnings grew from the previous quarter driven by an increase in smartphone sales and decreased marketing expenses,” Hyun Joon Kim, Samsung’s vice president of mobile planning told analysts.
In other words, Samsung sold more phones while pumping less money into marketing. Kim further pinned the quarter’s success on sales of its flagship smartphone the Galaxy S3 and its oversizedGalaxy Note 2handset.
Research firms underscored the two companies' divergent financial performance with units shipped. "Samsung shipped almost two times more smartphones and grew nine times faster than Apple during the quarter," said Strategy Analytics Executive Director Neil Mawston in a report digging into the first quarter.
Another research firm, Juniper Analytics, estimates Samsung shipped 68 million smartphones during the first quarter, accounting for approximately 34% of the 200 million smartphones sold. Apple in contrast, sold north of 37 million iPhones during the same quarter.
The quarter met with the guidance Samsung had earlier provided, but it was all the more impressive because the company pulled it off despite being on the hook to pay out an estimated $600 million to Apple (writing that big check is still pending as yet more legal minds ponder the issue), and even before it dropped its next-generation smartphone, the S4, (which just went on sale in the United States over the weekend). The S4 is expected to keep the Samsung streak going, and one would think ought to light a fire beneath Apple.
Apple has stubbornly resisted offering a lower-priced iPhone, or a handset with a significantly larger screen-size (older, discounted models don’t count as a true lower price effort). In the tablet space it has been more willing to experiment, and has had great success with its smaller, and lower priced iPad Mini.
But with Samsung on a roll, and showing no signs of letting up on its variety of offerings, Apple may be forced to rethink its strategy. The pressure will be on for Apple to come up with its own plan to expand into new markets, and beyond the premium category that it has dominated for so long.
Until it does, you can expect the applause for Samsung to continue.
