Is Samsung Sales Disaster Bad for Apple?

Consumer Electronics

Published: October 7, 2014 6:41 am

Samsung Electronics posted unusually weak numbers in a forecast for third-quarter results. Operating income will be down about 60% to $3.8 billion. Since most of its sales derive from smartphones, it would be fair to ask if the announcement is bad news for major rival Apple Inc. (NASDAQ: AAPL). The answer is probably not.

Samsung is “between” products to some extent. Its Galaxy Note 4 has not been released. That means its next flagship product will not be in the market for several weeks. Also, the product is relatively expensive, which could dent sales. AT&T Inc. (NYSE: T) sells the Galaxy 4 Note for $299 with a two-year contract. It is too early to say whether consumers will warm to its 5.3-inch screen, which puts it somewhere between a normal smartphone and a normal tablet in size. If the product is a huge win, Samsung’s fourth-quarter earnings should recover.

Apple’s best quarter may be the current one, or the next. The iPhone 6 and iPhone 6 Plus are unqualified successes. Apple also has taken the risk of offering a 5.5-inch screen on the iPhone 6 Plus, not unlike the one Samsung has taken with its larger screen.

Samsung has to hope that its Galaxy Note 4 will slip in when Apple iPhone 6 sales have tapered and consumers who want a Google Inc. (NASDAQ: GOOG) Android-powered phone will have waited. If Apple steals a number of Android fans, Samsung may have lost whatever advantage it has because of its operating system.

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However, Android is the feature that will push many Galaxy Note 4 sales. Android has become the dominant operating system, both in the United States and in many large countries around the world. It has beaten down the market share of Apple’s iOS, which has been updated recently in an attempt to steal some of Android’s thunder.

An operating system can be a modest edge, though. If the iPhone 6 wins the smartphone war with Samsung due to strong features and the mad dash by consumers that often comes with Apple product introductions, Samsung has some more rough quarters ahead.

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