Android is a huge success. Google bought Andy Rubin’s company in 2005 and turned it into a smartphone operating system giant, with more than 50% of the global market and 700,000 activations a day this past December.
Perhaps, as Steve Jobs seemed to think, it was Eric Schmidt’s position on Apple’s Board of Directors that infected Google with an itch to enter the smartphone OS market. Or maybe Larry Page and Sergey Brin simply recognized the Next Big Thing when they saw it. (As Page points out, the company had begun Android development a year before Schmidt joined the Apple Board.)
Regardless of the “authenticity” of Google’s smartphone impulse, it’s the execution of the idea, the integration of Android into Google’s top-level strategy where the product really shines. Android improves quickly; the “free and open” platform is popular with developers and, perhaps even more so, with handset makers who no longer have to create their own software, a task they’re culturally ill-suited to perform. And everyone loves being associated with a technically competent winner. (I might be a little biased in my regard for the Android engineering team: Comrades from a previous OS war work there.)
For the past three years, Android has experienced a kind of free space expansion: The platform has grown without hitting obstacles. I’m not ignoring the IP wars, they’re real and the outcome(s) are still unclear, but these fights haven’t slowed Android’s triumphant march.
As we enter 2012, however, it seems the game may be changing. Looking at last week’s numbers for Motorola, HTC, and Samsung, we see a different picture. Instead of the old “there’s more than enough room for every Android handset maker to be a winner”, we have a three-horse’s-length leader, Samsung, while Motorola and HTC lag behind.
From October to December of last year, a.k.a. Q4CY11, Samsung is said to have shipped 35 million smartphones, taking it to the number one spot worldwide. Citing “competitive reasons”, Samsung no longer makes its sales/shipment numbers public, so we have to rely on ‘‘independent” observers to tally up the score. Having worked in the high-tech industry for decades, I’ve seen how this information game is played: firm XYZ sells its “research” to manufacturer W…and ends up as its mouthpiece. I’d love to follow the money, but these private firms don’t have to reveal who their clients are and how much they pay for their services. (For a more detailed discussion of these shenanigans, read an excellent piece by The Guardian’s Charles Arthur: Dear Samsung: could we have some clarity on your phone sales figures now? Another possible bias: The Guardian re-publishes the Monday Note on its site.)
But even if we “de-propagandize” the numbers, Samsung is clearly the number one Android handset maker, and, just as clearly, it’s taking large chunks of market share from the other two leading players: Motorola and HTC both announced lower than expected Q4CY11 numbers. HTC’s unit volume was 10 million units, down from 13.2 million in Q3; Motorola got 10.5 million units in Q4, down from 11.6 million in Q3.
This leaves us with the potential for an interesting face-off. Not Samsung vs Motorola/HTC, but…Samsung vs. Google. As Erik Sherman observes in his CBS MoneyWatch post, since Samsung ships close to 55% of all Android phones, the company could be in a position to twist Google’s arm. If last quarter’s trend continues — if Motorola and HTC lose even more ground — Samsung’s bargaining position will become even stronger.
But what is Samsung’s ‘‘bargaining position’’? What could they want? Perhaps more search referral money (the $$ flowing when Google’s search engine is used on a smartphone), earlier access to Android releases, a share of advertising revenue…
Will Google let Samsung gain the upper hand? Not likely, or at least not for long. There’s Motorola, about to become a fully-owned but “independent” Google subsidiary. A Googorola vertically-integrated smartphone line could counterbalance Samsung’s influence.
And so it would be Samsung’s move…and they wouldn’t be defenseless. Consider the Kindle Fire example: Just like Amazon picked the Android lock, Samsung could grab the Android Open Source code and create its own unlicensed but fully legal smartphone OS and still benefit from a portion of Android apps, or it could build its own app store the way Amazon did. Samsung is already showing related inclinations with its Music Hub and its iMessage competitor.
Samsung is a tough, determined fighter and won’t let Google dictate its future. The same can be said of Google.
This is going to be interesting.
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56 Comments
Please note that Samsung’s “smartphone” sales also include bada smartphones. So it’s not all a win for Android. Even so the Android Alliance seems to be reverting to Google / Samsung alliance (and not really that close) in the long run.
Did I just read a Samsung press release on Asymco? WTF?
You seem to reduce the scene to a Google-Samsung face-off. Sure it is interesting but by far the only face-off which matters is Apple vs the rest of the world, which today means Android.
And Apple vs Android looks increasingly like Apple vs MS-DOS war.
Except that it took over 11 years for Win95 to match the Mac, but only 2 years for Galaxy S to beat iPhone .
If this is a repeat of Apple vs MS-DOS, then we already know the outcome and Apple’s patent war won’t stop the inevitable.
So it would be interesting to analyse the Apple-Android face-off. How it defers from the 80′s situation and why for JLG the outcome this time could be different – or not.
Sure Samsung has taken the lead in the Android – rest of the world camp.
So it would be interesting to compare side by side two CE giants that are in direct competition: Apple vs Samsung. And even an iPhone5 vs Galaxy S3 preview.
We are just at the very beginning of this fascinating mobile market emergence. Now we all know what the product must look like. It should look like an iPhone, just like a PC had to look like a Mac, a modern car like a Citroen traction-avant in the 30′s, or a consumer car like a T Ford. All these companies set the pattern.
So don’t be fooled by Samsung’s lead and don’t discard the others. Sony, LG, HTC and many others will come back with a revenge.
Now expect to see every single CE company around the world to produce one of these mobile companions. And when it becomes a commodity, the brand value will shift : a Facebook phone, a Nike phone etc
So Samsung is only interesting to consider vs the leader Apple.
Samsung only major concern is the shaky patent situation of Google’s Android. Can you imagine that Apple (dreading a Mac vs MS-DOS fate) managed to block sales of Galaxy Tabs in a couple of countries! There might have been real tensions between Google and all its Android OEM. That is why Google quickly acquired Motorola basket of patents.
Should things turn sour, Samsung has a plan B called Bada.
@ JF Susbielle: You’re right, there is much, much more than the putative Samsung-Googorola face-off. For example, I’m waiting for the Apple’s real numbers, coming Jan 24th.
Regarding Mac’s “fate”, it’s been growing faster or much faster than PC clones for close to six years now. The Apple folks must fear the same sorry outcome for iOS devices. We’ll see, history doesn’t repeat itself, it stutters.
Yes, there is Bada, and also a few Samsung Windows Phones. But do these move the needle?
According to Canalys, Samsung shipped 3.5 million phones running Bada in Q1 of 2011. This rose to 4.5 million phones in Q2 of 2011
@ bada: Interesting figures. Does Canalys show Windows Phone numbers for Samsung?
BTW, this is the same Canalys that, less than 3 months ago, crowned HTC as the top smartphone vendor: http://j.mp/z8Jmzj
I’m generally skeptical of “research firm” numbers. I know we often have no other source…
What’s interesting about this topic is that to the extent that Android is basically dominated by three players, it sure seems like a three-dimensional chess game where sooner or later (i.e., in 2012) one of the counter-moves is going to surprise.
Does HTC come to realize that they can’t compete as a software undifferentiated player, and either fork or build a hybrid Android-Microsoft strategy?
Does Google come to realize that if the market becomes boiled down to forked providers, Samsung and their own devices (via Motorola) that they are better keeping the margins for themselves?
Something’s gonna give.
@ Mark Sigal: You’re right, something’s gotta give. For HTC and others, this is going to be the race to the bottom while a big player such Samsung adds services/value to its offering. GOOG execs must be wondering about the future of their disintermediation play. (See Bill Gurley’s The Freight Train That Is Android http://j.mp/mGEJ5r)
Android is a “success” in terms of prevalence (has it generated enough profit in aggregate to even offset the acquisition & development costs, yet, I wonder?) only because Google is willing to *donate* multiple billions year over year to give the gift of an iOS clone to phone OEMs.
The *instant* Google scales back it’s investment in Android or holds back any significant portion it seems inevitable that the entire platform is toast.
It is unclear to me what value Google extracts or expects to extract in the future from the smartphone business that it’s propping up with Android. Mobile web search ad revenue isn’t cutting it nor does it seem likely to. Search & service partnerships aren’t helped by Android, in fact they seem more likely to be jeopardized by it.
I’m sure there are smart people at Google who have this figured out, but from my perspective it seems like a colossal waste of effort & resources.
@ SamF: Yes, the mobile add revenue isn’t there yet. And, because os screen size, may never be enough to justify the Android expense.
I used to joke Microsoft had a “hump anything that moves” strategy, perhaps Microsoft 2.0 uses the same rule: smartphones are going to be big, we need to be big on smartphones. Perhaps making and selling a Googorola will help generate revenue. I really don’t know. But we will, sometimes this year.
Samsung has an advantage over Motorola/Google and HTC in that they have a vertically integrated supply chain. Chip design, foundry, DRAM, screen technology, screen fab, plastics are all in the Samsung conglomerate. This gives them early access to new technology, lower costs, customized designs, preferential treatment in constrained part delivery, etc.
I suppose Sony and LG are closer to having a complete supply chain. HTC has some of it (DRAM, plastics, chip design, but no foundry or screen tech) and Motorola has very little.
1) Samsung’s vertical integration means they can take the “throw shit at the wall and see what sticks” strategy to the extreme. This is playing out well for them.
2) Unlike HTC and Motorola, Samsung has very strong distribution in Asian markets, with retail stores, and strong relations with 3rd party retailers.
3) Samsung has tremendous marketing muscle.
@JF Susbielle – I am pretty sure Apple will be thrilled if iOS vs Android turns out the way Mac vs PC has. The mac currently retains the vast majority of profits in the PC industry (>50%). I think Apple will be a very rich company if the iPhone ends up taking >50% of the smartphone industry.
Samsung is excelling because they are a manufacturing monster: They make OMAP, Exynos, Snapdragon and Tegra devices. They make OLED and LCD and SAMOLED+ devices in many sizes and with many varying features.
They use their chips and external chips and their screens and external screens.
Compare to the Motorola OMAP train, or the HTC Snapdragon obsession, both of which couple their fate with the fate of the competitiveness of their platform (which is exactly why HTC has faltered — they haven’t had a killer device in almost a year).
The story really has little to do with Android, per se. The story is about Samsung deciding to go full bore on mobile and yielding success because they are a technology colossus.
However to the argument that Samsung could fragment off, that is *by design*. It is a marvel that people still observe that like it’s a great mistake by Google that has gone overlooked. Samsung, Sony, HTC, LG, Motorola, et al, none of them would have taken the risk with Android if they didn’t have that out, and for sure they retain that right to splinter off when it serves them.
To Samsung making their own app market, every Samsung Android device has come with a Samsung market since the outset. It goes ignored, but it sits there just in case animosity breaks out.
`Samsung’s vertical integration means they can take the “throw shit at the wall and see what sticks” strategy to the extreme.’
Samsung makes a wide variety of products to ensure that they have one that fits every type of consumer. That’s what good companies generally do.
`I am pretty sure Apple will be thrilled if iOS vs Android turns out the way Mac vs PC has’
Har de har har. Apple went almost a decade without profits until they were bailed out by Microsoft. Their current computer market is almost entirely held aloft by the iDevice halo effect.
“Samsung makes a wide variety of products to ensure that they have one that fits every type of consumer. That’s what good companies generally do.”
LOL That has nothing to do with being “good”.
“Their current computer market is almost entirely held aloft by the iDevice halo effect.”
People like you has been saying this for years now. First with iPod, then iPhone, now iPad…. As much as you don’t want to admit it, Apple reinvented the Smartphone market, they reinvented the Tablet market, and they just created the Ultrabook market.
>LOL That has nothing to do with being “good”.
Mature markets always favor companies that cater to customer needs. The “take it or leave it” model is never sustainable.
>People like you has been saying this for years now. First with iPod, then iPhone, now iPad….
Err, what? I am saying, right now, that Apple’s history does not validate the “they love the PC versus Mac” market — it says the contrary. Apple was never happy as a niche player, just as they’ve done everything in their power to avoid becoming a niche player in the smartphone industry (some providers are now having two-for-$0 deals on the iPhone 4, clearly sanctioned by Apple given that Apple must sanction all discounts. I suppose that flips that ridiculous argument around).
It is interesting comparing the many absurd claims made on random comment boards regarding Apple’s motives to the actual actions of Apple — the company that advertises like crazy, desperately tries to achieve lock-in and a network lock-in effect, the company that does everything they can to tell you that this is the platform that’s where it’s at.
Only they want to be a niche, exclusive product.
Right. I have a bridge to sell you.
@ JF Susbielle: Apple had problems in its competition Mac vs. MS DOS/Windows PC in the 1990s because it lost its profitability. That is absolutely not the case right now, in either mobile or PCs, where Apple has a huge share of the profits in both mobile and PCs. This is completely unrelated to market share — in cell phones for example Apple has ~5% of the worldwide market and 60%+ of the profit. Meanwhile, other than Samsung and to a smaller extent HTC no one has made ANY money from Android, and Samsung + HTC have made far less than the iPhone. (Motorola, LG, etc. are losing money and by all indications so is Google on its Android business — it may be years, if ever before they recoup their $12B Motorola investment, never mind the purchase & R&D costs sunk into Android, or the future cost of settling Oracle’s Java lawsuit.
There is very little indication that Android’s success will damage Apple’s profitability. To repeat again — Apple’s current profitability in Mac & iOS devices is completely disconnected from overall market share.
@ Dennis Forbes: An Apple that coasted for 15+ years. As soon as they got serious again, that changed fast. There’s no evidence of a sleeping Apple willing to coast on iMac/MBA/iPod/iPhone/iPad/iTMS.
Could you elaborate on your assertion that Android is intended to be forked by design? That would imply that what Amazon, Bada, B&N et al is doing with Android is not only desirable to Google but the goal?
If Samsung pulled an Amazon, in-housed an Android fork and tried to create a vertically integrated platform like iOS (an eventuality that seems more & more likely given the CES news from Samsung & Acer) how does that benefit Google?
@Dennis Forbes, I’m just glad you’re not handling my investments! I hope you’ve been shorting AAPL for the past few years, since it’s obviously such a failure. The $100 billion in cash it holds, along with most of the worldwide profits in every market it’s in, are sure signs of a badly run company.
>Could you elaborate on your assertion that Android is intended to be forked by design?
I didn’t say that it is intended to be forked. I said that it *could* be forked as an option of last resort. That strategic option is what built the alliance of competitors.
>That would imply that what Amazon, Bada, B&N et al is doing with Android is not only desirable to Google but the goal?
The Amazon Kindle Fire is adding millions of Android development targets, making it a more lucrative platform (there are no special hoops to target the Fire, beyond simply submitting to the Amazon store). It absolutely supports the platform. Those apps often use Admob, and thus benefit Google.
>If Samsung pulled an Amazon, in-housed an Android fork and tried to create a vertically integrated platform like iOS
Aside from the fact that this would be very dangerous for Samsung to do (if I didn’t have gmail, Google Maps, or the Google Market on my S2, there is no chance I would have bought it), let’s imagine that alternate universe where Google *didn’t* create Android.
Right now 90%+ of the smartphone market would be Apple. There is no doubt at all about that (despite the garbage claims that Apple really just wants to be a nice player….pushing hundreds of millions of devices). Sony mobile would be done. Motorola would be done. HTC would be done. LG mobile would be done. Samsung…would be done. The most important computing platform of the era would have a single organization that Google would have to essentially go through to get to consumers.
If there were 100 companies that split the market, all of them with forked inhouse versions of Android, that *still* is a better position for Google because they can sell their advantages, and retain the negotiating upperhand. With a dominant Apple they would have had no power at all.
“I hope you’ve been shorting AAPL for the past few years, since it’s obviously such a failure. ”
Honestly stupid comments like this — ridiculous diversions that show such a profound inability to read or understand — are what make any discussion involving Apple so futile.
@Dennis Forbes:
Anytime someone starts using the word “desperate” in connection to the 2012 Apple, they a forfeiting their credibility. Bandying about the canard that Microsoft’s 150 million investment in Apple restricted stock as part of the Quicktime case settlement “bailed out” Apple further nullifies your argument.
As I stated above: Apple has approximately 5% of the worldwide cell phone market and 60% of the profit. Suppose via their “desperate” efforts, Apple were able to double their market share to 10% — would their profit suddenly double to 120%? Apple has simply figured out how to control the profitable share of all the markets it is in, and to leave the unprofitable part to others. Quarter after quarter the iPhone’s ARP stay steady or goes up. So long as Apple keeps getting paid $600+ per iPhone, it could care less if the carriers are giving them all away.
We seem to be forgetting who owns the operating system, if google wanted to they could just pull the licensing and use Motorola as their maunfacturer, cutting everyone else off at the knees. Game over for Samsung and everyone else.
>Anytime someone starts using the word “desperate” in connection to the 2012 Apple, they a forfeiting their credibility
If you’re only interested in an Apple circlejerk, that would be how you would see it I suppose. Only here in the real world many ultra-profitable organizations, such as Microsoft, desperately seek market guards that maintain whatever advantage they have retained.
>Apple has approximately 5% of the worldwide cell phone market and 60% of the profit
Talking about the overall cell phone market is the real canard that defies the obnoxious bias of the writer. It’s like saying that Apple has most of the profits of the calculator market because a computer can also do calculation tasks. A smartphone has perilously little in common with a dumbphone, beyond overlapping one single function of it.
“Bandying about the canard that Microsoft’s 150 million investment in Apple restricted stock as part of the Quicktime case settlement “bailed out” Apple”
Awesome. Every single technology viewer hailed it as a Microsoft bail out of Apple, but in the distortion field of the Apple zeitgeist, now it was Microsoft desperately seeking relief from Apple’s onslaught. Awesome.
What Samsung has over all other Andriod makers is the billions of dollars it collects from manufacturing items for Apple in its back pocket. HTC and Motorola need to survive on what they make while Samsung cann afford to take chances in building a long term vision on the profits being earned from their Apple deals. It would be interesting to see how this relationship goes forward, Apple knowing they are funding a competing product.
I do believe that going forward in 2012, Apple will terminate this relationship with Samsung. We can guess that each smart phone that Samsung makes is not very much based on the fact that sales of phones are not being published. If this was being reported some very good analysis could be made to how much profit the phones were tot the bottom line of Samsung. I suspect not much despite all the phones being sold.
One last thought, what happens as the article says when Samsung rules the Andriod sales (which in theory in can)? Will Google be at it’s partner bidding? With billions at stake will either one afford not to work really close? It will be an interesting 2012 year for Andriod.
“If I didn’t have gmail, Google Maps, or the Google Market on my S2, there is no chance I would have bought it.”
Why wouldn’t a Samsung fork have Gmail access or Google Maps? You think Samsung couldn’t write a client for those services? Even iOS has those things.
As for Google Market (by which I assume you mean Android market), given that Samsung ships the majority of Android phones, I’m sure most developers would immediately post their apps in the new “Samsung Market” when it opened up.
As we speak Amazon is demonstrating that it can fork Android, drop “Google Market”, and still beat the tar out of all the tablet OEMs using licensed Android.
“Only here in the real world many ultra-profitable organizations, such as Microsoft, desperately seek market guards that maintain whatever advantage they have retained.”
You’re talking about Apple circlejerks and then bring up Microsoft? Windows, Office and their Servers & Tools division make all of their profits, the rest is, literally, “throwing shit at the wall and see what sticks”. And Google, sadly, is turning into a Microsoft 2.0.
Seriously, “maintain whatever advantage”? And how has that worked out for everyone? For Microsoft’s Windows Mobile or for RIM’s BlackBerry? 3 years ago I was hearing how RIM has the “lockdown” on “corporate smartphones” and how Apple doesn’t stand a chance because RIM isn’t giving that away anytime soon.
It’s really not complicated: Innovate (however you define the term) or die. Apple has to keep pushing their ecosystem and be prepared for disruptive technology to eat away a market or two of them within years, and that’s what they are focusing on—not trying to retain marketshare by being on the defensive. Do you think simply trying to defend from Samsung, Acer, Microsoft, et al is a winning strategy, when those companies can so easily undercut Apple on price? Or do you think it’s smarter to focus on profits and differentiation?
Case in point: video games consoles. Nintendo, a very small player compared to others, didn’t survive (and survive well) because they were playing the same game as Microsoft and Sony, but because they played differently. That’s what Apple is doing and it’s working for them.
Unless, of couse, your understanding of the corporate machinations is simply that much better than everyone else’s, and Apple really should have their share price cut to $15, despite the _massive_ profits they have (profits which are, on the whole, increasing).
@Dennis Forbes: ” A smartphone has perilously little in common with a dumbphone, beyond overlapping one single function of it.”
Lets see which one of these is the “single function”: voice calls; text messages; photographs — and plenty of dumbphones aka “feature phones” can do quite a bit more.
Facts are such biased, “Apple zealot” things.
@ Mike A: Very good point. If Samsung pulled out of the Google Market they & Amazon would be very close to owning the Android developer market as a whole, Amazon on the tablet side and Samsung on the phone side.
The two of those together would make the largest Android platforms by far. It would be a tough situation for devs, though, since Amazon is on something like 2.3 and I’m guessing Samsung would probably take a pre-4.0 build, too.
Google’s services (mail, calendar, maps, etc.) are pretty much commodities today, anyway, readily replaced.
“As Page points out, the company had begun Android development a year before Schmidt joined the Apple Board.”
And it looked like a BlackBerry clone not an iPhone clone. Android didn’t start looking like an iPhone until after the iPhone had been announced and shown. Android has been succesful but it has also been derivative of whoever the top player in the market was at the time.
The word “Android” itself is propaganda. Google does not have a platform. Amazon and Samsung have platforms.
@Dennis Forbes
…
“Right. I have a bridge to sell you.”
So, you’re the one who bought the bridge
Some of your statements in the third paragraph don’t seem entirely solid to me. For one, Android’s “quick improvements” are slow to reach consumers—if at all—if one follows news reports about the rollout of Ice Cream Sandwich and previous updates. Anecdotal evidence suggests that while more and more developers are indeed turning to “free and open” Android, the real interest still is in iOS development where the programming costs are lower in terms of device configurations to code for and to support, and the returns are much higher in terms of consumer spending on apps and money paid back to developers. While I agree that handset makers are “ill-suited” to writing software, they are still writing plenty of code on top of Android—custom UI and other handset-specific tweaks—leading in part to the long delays and outright incompatibilities in Android OS updates I mentioned earlier. In fact, the entire Android ecosystem seems singularly focused on the handset makers and carriers (Android’s real customers), with little effort spent on bringing continuing value to existing Android users (as compared to Apple or Microsoft’s efforts). The whole premise of Android as “winning” through excellence rings a little hollow to me. While it has clearly captured a huge percentage of units shipped, that metric of “success” loses its shine when faced with Apple’s capture of a huge percentage of profits. I don’t doubt that Android has many merits and has its fair share of consumer popularity, but its rapid unit growth seems more about market forces like carrier availability and handset maker retail incentives and manufacturer reluctance to invest in a vertically-integrated solution than “technical competence”. Samsung vs Google also ignores the potential threat of successful forks—like Amazon’s new Kindle efforts—that strip Android to its core and return no value to Google, though this is perhaps a story more for tablets than smartphones at this point… We should even ask whether Android’s success equals financial success for Google. I wonder whether Android’s costs are actually recouped through ad revenue specifically from Android devices, and whether that same revenue wouldn’t happen anyway via Search on other devices like iPhones, etc. If Android was a bid to maintain Google’s dominance on mobile advertising, it’s far too early to say whether that investment was financially worthwhile.
“Every single technology viewer hailed it ($150 investment) as a Microsoft bail out of Apple, but in the distortion field of the Apple zeitgeist, now it was Microsoft desperately seeking relief from Apple’s onslaught.”
That’s the distortion field for you. “Every single technology viewer” wanted to believe that and discarded the actual reason. Apple had several $billion in cash in the bank when that went down, enough to keep running for several years if they never sold another thing (which was getting close to true). The $150 million was relative petty cash, far less important than keeping Office on the Mac.
The case of the stolen QuickTime code was settled and Microsoft profited quite handsomely from the sale of that stock. I guess crime DOES pay!
http://www.engadget.com/2011/12/20/apple-acquired-next-15-years-ago-jean-louis-gassee-still-dreami/
Google – Samsung tension is certainly possible, but Samsung has prepped [or due to IP been forced] to support Windows 7 and their own OS, Bada. My guess is that their long term goal is to establish sufficient brand presence to migrate to Bada as a “good enough” OS for smartphones and tablets. So getting money from Google is nice, having MS as a partner is OK, but having heir own OS and being closer to an Apple model with the profit is where they aspire. However, all of this is very hostage to enormous IP issues they have in copying Apple, using Android.
Regarding their partnership and competition with Apple, they are risking a very good partner in Apple [a lot of major production and technology development was supported by Apple in dollars and ideas] with their desire to compete [unfortunately by copying] with Apple.
I imagine that Apple is looking to develop strong alternatives to Samsung across a range of industries and partnerships and thereby diminish their dependence or partnership with Samsung.
It will be interesting to see whether the bet on copy and compete wins vs their earlier partnership. Clearly Samsung want to move up the value chain like they did with Sony on TVs, but in the end Samsung competes on price and so will be back to commodity profit margins, unless they can make the leap to Bada and have a distinctive innovative contribution.
Finally, Jobs did not say Android [Linux on mobile device as a problem] what he said was after 2007 in fact 2009, Google Android copied the innovation and IP shamelessly from Apple, gave it away to OEMs, and created unfair competition. He said stop using Apple’s ideas. Just look at Android hardware, software, etc. design on top of Mobile Linux and it is impossible to not see the shameless copying.
Ironically, Microsoft did bring innovation to the mobile space with Windows 7 and its generally got good marks. It was late, yeah, but that was due to the need [or cost] to be innovative not a copy cat. Therefore, it could be argued that Android’s copying vs Microsoft innovation was a 3 year advantage that Apple lost when Goggle copied Apple.
@Sean W: One might argue that Google is likewise “ill-suited” to writing software given the general craptitude of Android.
Though I don’t believe Google has released any official numbers on Android revenue, they have said that iOS makes up approximately 2/3 of their mobile search revenue, search based ads being their main business. (Side note: how weird is it that the digital equivalent of the Penny Pincher sales flyer is such a force in tech? Kind of sad.)
The last report I saw was a projection of $2.5B for 2011 in mobile ads for Google which would mean that if the remaining 1/3 went to Android they’d have made something like $825M in revenue from it.
I can’t even begin to guess how deep in the hole they are on Android total.
It seem more & more likely to me that Android is simply a hedge against a mobile future, a scheme to tread water until they figure something else out.
@Dick Applebaum
Touché
http://blogs.hbr.org/cs/2011/10/apples_unlikely_saviors_gil_am.html
“let’s imagine that alternate universe where Google *didn’t* create Android.
Right now 90%+ of the smartphone market would be Apple. There is no doubt at all about that”
Bzzt. Apple doesn’t even have the supply capacity to produce 90% of the world’s smartphones.
If Google never produced Android the people who walked into kiosks and asked for something like an iphone would have ended up walking out with something else in most cases. Instead of promoting (an)Droid Verizon would have gotten behind WebOS because, duh they needed a iphone clone. And WebOS was even better than Android at the time.
It is an oft-repeated myth that Apple had some huge lead during the days leading up to Windows 95. Apple may have had a slight lead during the Apple // days (certainly, they did in education), but if you look at the actual market share and profit share figures — Apple was always a smaller player in the PC game.
In contrast, with iPod/iPhone/iPad, Apple is now leading from a position of strength. They no longer have to try to catch up with everyone else, just maintain things. Look at how many companies produce accessories, cases, applications, etc. for the iPad/iPhone — now compare that with other tablet/phone builders.
Tech specs alone will never allow a competitor to eat Apple’s lunch. The only thing that will, is if consumers perceive them to be better as a whole (including apps/accessories/cases/etc) than the Apple ecosystem.
“Why wouldn’t a Samsung fork have Gmail access or Google Maps? You think Samsung couldn’t write a client for those services? Even iOS has those things.”
Oh Samsung might make a client, but it would almost certainly be miserable. The excellent gmail and Google Maps features of anointed Android devices is a major advantage of the platform. Apple is rolling with some ancient Google Maps version and a miserable gmail app.
“As we speak Amazon is demonstrating that it can fork Android, drop “Google Market”, and still beat the tar out of all the tablet OEMs using licensed Android.”
The Fire is doing gangbusters because Amazon has the Apple-like content making. There are incredibly few who could pull that off.
“Apple had several $billion in cash in the bank when that went down, enough to keep running for several years if they never sold another thing”
Apple had a billion in cash and short-term investments, and over a billion in immediate liabilities (accounts payable and bank debts). Apple’s days at the time were considered very numbered, and in no illusion world could they have kept that up for “several years”. Vendors were months away from cutting off supplies.
Microsoft’s purchase of a few, non voting shares of Apple, for $150M, certainly helped, however I’m fairly sure, even Bill Gates said it was Steve Jobs that saved Apple. Steve Jobs made the deal possible and we can see the methodical approach he took to put his company back and make it better than ever.
As far as who makes money on phones, it is interesting to see the break down… as Microsoft makes more off Android than they do off Windows 7 and (unless something has changed) Google makes more off iOS search than they do off searches through the Android OS…
Microsoft never really had very good software – they still do not – though Exchange/Outlook is not bad for most business needs, there certain is a lot of horrible software and horrible systems developed on the Windows platform. Maybe that’s part of their success, but its interesting to see the differences between Win/Tel and Andro/’open’/OEMs …. Now that Google is also an OEM and other OEMs are co-opting the “open” Android OS. I would also say Android parallels the Win/Tel side with crappy software, but this time the Andro/OEM group has less software in total, less support in total and a lot of bad possibilities coming up.
What happens when the OEMs are big enough and smart enough to ignore Google and make their own portable OS …. and have ‘curated’ apps and a fancy walled garden?
@Dennis Forbes: The $150 million Microsoft bought in non-voting stock was the equivalent of good weekend of Mac sales at CompUSA. The other thing it did was shoot Apple stock up over 30% overnight.
Apple executive vice president and chief financial officer Fred Anderson. “Our cash balance at the end of Q2 was in excess of $1.4 billion, our inventories were just over $500 million, and despite the quarter’s loss, we generated positive cash flow from operations.” Revenues for that quarter were $1.6 billion and they had $1.15 billion in receivables. Immediate payables were just under $1 billion with about another billion in accrued expenses. The next quarter had slightly higher sales, slightly lower liabilities plus they wrote off almost $400 million for the purchase of NeXT.
No, Apple wasn’t doing well but their 10-Q filing for September 1997 doesn’t agree with you. Maybe they’d have to cease operations and suspend many expenses to run for another few years, but Apple was still solvent with 20% margin on sales at the time.
Vendors were not months away from “cutting off” supplies, but the favorable terms Apple was getting from suppliers was clearly going to be affected in the near future. Apple would have been forced to tap the same junkyard class parts sources the PC industry was using.
Dennis Forbes wrote, “Samsung, Sony, HTC, LG, Motorola, et al, none of them would have taken the risk with Android if they didn’t have that out” (forking).
.
That certainly wasn’t the case when they signed up to be Windows Mobile (and WP) providers. Android sure looks to me to have been a free option. Care to substantiate your statement somehow?
Samsung is interested in seeding markets with innovative gadgets but only as a type of lead that it wants others to follow and manufacture. It sees itself as a component provider first and not as direct and consistent competitor to other device makers. It is a similar position to Google in that Google doesn’t necessarily want to be a handset manufacturer but to make sure that the right handsets are being produced.
I could see Samsung and Google allying to make sure Android gadgets are free of IP claims.
Amazon launches heavily subsidized smartphone. Placing $1-200 subsidy on device BELOW COST. They pick up significant share in the mid-tier smartphone segment.
Google has to decide whether to a) prop up their Android partners (Samsung, HTC, Moto, SE, etc) or b) go 100% Moto in a vertical OEM/OS play with massive advertising subsidies.
Apple maintains high end market share.
Samsung, HTC, Moto need to a) either trust/rely upon Goog ad $’s to help them subsidize their devices to remain competitive against Appple or b) go big on their own OS/advertising platform. Samsung launched their own AdHub platform which should work across their phones/tablets/TV’s/PC’s
Amazon is the big disruptor here.
“That certainly wasn’t the case when they signed up to be Windows Mobile (and WP) providers. Android sure looks to me to have been a free option.”
Ah, the free canard. Are people aware of how little Windows Mobile licenses cost? I would wager good money that Samsung spends *far* more on their Android development efforts, per device, than they ever did on Windows Mobile licenses. The same goes for every other maker.
The free bit is a noisy distraction.
When vendors sold Windows Mobile devices, they had zero commitment to it _and it showed_. A Motorola Windows Mobile device was a miserable PoS (I sadly lived with a couple of them) because to Motorola it was an unfortunate necessity that they diversify across OS’.
Right now all of the major makers are very much behind Android. Yeah, they have alternative OS’, but Samsung, Sony, HTC, LG, and Motorola all essentially bet the farm on Android (they had to coordinate on something because the Apple option was a juggernaut).
@dennis forbes
“Har de har har. Apple went almost a decade without profits until they were bailed out by Microsoft. Their current computer market is almost entirely held aloft by the iDevice halo effect.”
The money was inconsequential what helped apple was the agreement that Microsoft made to continue development on the mac. The so called halo effect is not what sells macs. They sell high end/laptops because the computers and os are more reliable and they have free support in store. Their computer business has been growing more than the PC market since long before the iphone and ipad.
“Mature markets always favor companies that cater to customer needs. The “take it or leave it” model is never sustainable.”
This makes no sense Apple caters to the customer, the mature market you speak of do not. Apple retail is by design about customer service. You should check how apple rates next to other computer companies like hp and dell in the ‘mature’ market. Apple’s last decade begs to differ with your opinion.
“Err, what? I am saying, right now, that Apple’s history does not validate the “they love the PC versus Mac” market — it says the contrary. Apple was never happy as a niche player, just as they’ve done everything in their power to avoid becoming a niche player in the smartphone industry (some providers are now having two-for-$0 deals on the iPhone 4, clearly sanctioned by Apple given that Apple must sanction all discounts. I suppose that flips that ridiculous argument around).”
I agree apple does not want to be a niche player but they also don’t want a monopoly, ala microsoft or google. Just the high end profitable part of the market which is what they have. Let the Android market race to the bottom like the ‘mature’ PC market has done.
“The Amazon Kindle Fire is adding millions of Android development targets, making it a more lucrative platform (there are no special hoops to target the Fire, beyond simply submitting to the Amazon store). It absolutely supports the platform. Those apps often use Admob, and thus benefit Google.”
This is true until amazon decides they want those ad dollars and they are very capable of capturing that revenue.
“Aside from the fact that this would be very dangerous for Samsung to do (if I didn’t have gmail, Google Maps, or the Google Market on my S2, there is no chance I would have bought it), let’s imagine that alternate universe where Google *didn’t* create Android.”
The same was said about competing with the same people who you supply with components. I think they will do this very thing one day with google. Why would they leave that money on the table and what can google do about it.
“Talking about the overall cell phone market is the real canard that defies the obnoxious bias of the writer. It’s like saying that Apple has most of the profits of the calculator market because a computer can also do calculation tasks. A smartphone has perilously little in common with a dumbphone, beyond overlapping one single function of it.”
The smartphone market is rapidly becoming the cell phone market, everyday brings us closer to that point probably by this time next year.
Awesome. Every single technology viewer hailed it as a Microsoft bail out of Apple, but in the distortion field of the Apple zeitgeist, now it was Microsoft desperately seeking relief from Apple’s onslaught. Awesome.
No but microsoft did make the deal because they were worried about the antitrust case the DOJ was preparing.
“Oh Samsung might make a client, but it would almost certainly be miserable. The excellent gmail and Google Maps features of anointed Android devices is a major advantage of the platform. Apple is rolling with some ancient Google Maps version and a miserable gmail app.”
One day bada will be good enough and so will the google clients they create to access the services. They will probably get into ads also. The people buying Android dont care as long as its good enough.
“The Fire is doing gangbusters because Amazon has the Apple-like content making. There are incredibly few who could pull that off.”
True but once its been done by one company more will follow.
In the absence of vendor lock-in, Samsung’s dominance of smartphones being a threat to Google makes about as much sense as Toyota’s dominance of car manufacturing being a threat to Mercedes-Benz. There’s no part of the Android stack that isn’t open to competition.
“You think Samsung couldn’t write a client for those services? ”
Perhaps they could spend time first making their very own Kies software work correctly, and same for their existing apps.
It’s notable that my experience with my (essentially raw) Google Nexus One is much better than friends and relatives with Samsung Galaxy S, and when I look into it, it’s often because Samsung has fiddled with something or “improved” it, or just as often, completely missed the point.
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