Samsung surprised the world with the popularity of its first phablet, the Samsung Galaxy Note. The company is sitting on a very different world as it heads towards the release of the fourth iteration of the device, the Samsung Galaxy Note 4, and it may be the last chance for the company to dominate the smartphone industry.
Galaxy Note 4: Samsung’s last chance
Release after release from Samsung has left most consumers confused about which phone is which. There are only two that stand out. The Samsung Galaxy S5 is already failing to sell enough units to impress investors and keep the company’s financials impressive. That leaves the Galaxy Note 4 as the company’s last chance. With Apple Inc. (NASDAQ:AAPL) hot on the phablet trail, there may be little comeback if the Note 4 is a failure.
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis
Samsung warns of smartphone failure
Samsung has not yet released its earnings numbers for the three months through June, but the company has warned its investors to expect a massive shortfall in its smartphone numbers. It appears that Samsung is losing to home-grown competitors in China and Apple Inc. (NASDAQ:AAPL) in the premium smartphone world. The Galaxy S5 has not performed as promised, and other Android manufacturers are beginning to catch up.
Samsung burned its brand and took its earnings out of the smartphone market while things were good. Now that the western market has become saturated margins are compressing. The same effect has taken hold in China, albeit faster because of local competition and maturing technology. There’s not as much profit growth to be had in the smartphone market. Premium is where the margin is, and the Galaxy Note 4 may be Samsung’s only chance to keep a decent foothold in that market.
Samsung needs to show its customers what makes its devices different. The Galaxy S5 obviously didn’t differentiate itself enough to justify its outsized price tag. The Galaxy Note 4 will have to if the company ever wants to make a decent smartphone profit in the future. The problem is that the company is besieged from all sides.
Samsung loses the phablet market
The phablet form factor is enduringly popular and Samsung can likely be called a pioneer in the design of massive smartphones, but the company will have to share the space with Apple Inc. (NASDAQ:AAPL) soon, at least according to rumor. Samsung has held the phablet market in its hand for a long time, but the Galaxy Note 4 will not be able to rely on that lack of competition.
Apple’s phablet market entry will change the way customers perceive the product category, and the way they see the Galaxy Note 4. Samsung has an opportunity at the moment. It can capture the market and compel it to side with the Galaxy Note 4 before Apple introduces its larger iPhone next year, or it can give up smartphone profits.
Samsung may be relegated to the low end of the smartphone market, but the Galaxy Note 4 can save the company from the onslaught of Apple, and its Android competitors.