Big comeback day for Samsung

October 8th, 2015
On the day Samsung launched its new flagship product in South Africa, it also announced a return to its profitable ways, echoing news from its greatest rival, writes ARTHUR GOLDSTUCK.

It was a coincidence that Samsung Electronics announced an expected surge in profits the day it launched a new flagship device in South Africa. Nevertheless, it will have done wonders for confidence in the company as it brings to market a device that is notable for its incremental improvements rather than startling innovation.

The Samsung Galaxy Note5, now in stores, will go head-to-head with the Apple iPhone 6Ss Plus, which arrives in the country a week later. Again, both the similarity in model numbers and in release dates locally are coincidental.

However, it is no coincidence that neither company is wasting time alerting the market to the fact that it is riding high. A week earlier, Apple had announced it had sold more than 13 million new iPhone 6s and 6s Plus models, which it described as “a new record, just three days after launch”.

“Sales for iPhone 6s and iPhone 6s Plus have been phenomenal, blowing past any previous first weekend sales results in Apple’s history,” said CEO Tim Cook.

Samsung meanwhile forecast its first increase in quarterly profits in two years, saying it estimated its profit for the July-September quarter would leap 80 per cent to $6.3-billion.

Not that it was selling more phones, however. According to Reuters, “favourable currency rates and robust component sales appeared have to offset weakness in smartphones”. In fact, Samsung had lost market share to Apple at the high end and to Chinese rival Xiaomi at the low end of the smartphone market.

Analyst Lee Seung-woo told Reuters: “There were worries that overall earnings will continue falling as mobile profits declined, but now the numbers make the case that Samsung has the capacity to withstand weakness from the mobile business.”

The number of phone sold will be revealed when quarterly results are released later this month, and may put a damper on investor sentiment. However, that will mask the extent to which Samsung benefits from the surge in sales by smaller rivals: it supplies the computer chips that many manufacturers use in other smartphones, and even the display screens used by the likes of Huawei.

Of course, it would still like to sell more of its own handsets, and the Note5 is likely to build on the dominant position Samsung holds in the market for “phablets” – handsets with 5.5-inch and larger displays.

As reported in this column when the device was unveiled in New York in August, the default phablet size has steadily crept upward. The original Note, released in 2011, carried a mere 5,3-inch display. That is small by today’s standards, yet at the time was laughed off by many because of its “absurd” size. When Samsung went on to sell 10-million units in less than twelve months, a new industry category was born.

Apple’s 6s Plus is in a sense a descendant of that Note, in terms of Apple being forced to join the phablet revolution. In the same way that many of Apple’s rivals were forced to eat their words after initially dismissing the iPhone’s touchscreen as irrelevant, Apple has had to eat humble pie following its loud and derisive dismissal of anything bigger than a 4-inch screen.

The Galaxy Note eventually grew to 5.7-inches, and the new Note5 takes full advantage of the added real estate. As stated in August, however, the battle is now one for differentiation rather than format.

The Note aims at professional users who have probably already discovered the productivity benefits of a larger handset and the S-Pen stylus. Again, this is an area where Samsung led the way, after Steve Jobs’ infamous comment in 2010: “If you need a stylus, you’ve already failed.”

In 2015, Apple announced the Apple Pencil, a stylus for the new iPad Pro. The American technology media have bent over backwards to explain why the Pencil is not really a stylus, and why Steve Jobs meant something else altogether, proving that the great man’s so-called “reality distortion field” survives long after his passing.

However, change a few brand names, and he would probably not have disagreed with the comments made by Samsung president and CEO JK Shin at the Note5 launch: “The Pen is to the Note what the mouse is to the PC.”

The improved split-screen functionality of the Note5 takes it to a higher multitasking level, enhancing another user need that Apple has yet to acknowledge – but there is little doubt it will eventually have to follow in Samsung’s wake here, too.

So, while Samsung may not be able to match Apple’s sales figures for single devices, it is abundantly clear that it is also not skulking in the American company’s shadows.

* Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Follow him on Twitter and Instagram on @art2gee

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