Not that this is new to most investors, but Samsung has become a very formidable competitor in the smartphone market. Also, assuming Apple enters the TV market as expected both companies will go head to head in that market as well.
The real question remains whether people are buying Samsung phones over an iPhone or as the best option available or for the price. Either way, it definitely shows where consumers are buying phones instead of Nokia (NOK) and Research in Motion (RIMM).
Without doing much research, I'm assuming most of the gains come from Asian markets and not North America. With most of my friends owning iPhones, its difficult to assess the Galaxy as a true threat to the iPhone.
Bloomberg West did a nice piece the other night about the margins on the two phones. The Galaxy cost less to make and starts out with comparable margins. Over time though, costs dropped for both phones, but only Samsung had to lower prices. This left the iPhone with much higher profit margins as the products aged.
According to this Bloomberg report, Samsung made $5.1B in operating profits for Q112. This was nearly 10% above analyst estimates. Significantly below what Apple makes each quarter.
This highlights how the market has become a stock pickers paradise. The new economy will not lift all boats especially in the tech sector. Apple and Samsung appear the dominant players while everybody else might just fade away.
It also highlights how Apple is Samsung's biggest customer, buying chips and displays from the company. Something tells me this won't last much longer as they've become each others biggest competitors especially if Apple enters the TV market as expected.
One has to wonder if Apples undoing will ultimately come from a company like Samsung that can offer a similar product for a cheaper price. Wireless carriers have to be getting tired of subsidizing Apple profits while the carriers spend billions upgrading networks to handle all the data traffic.
Some lesson has to be learned from how Microsoft (MSFT) took the PC market away from Apple back in the 1990's. Will it happen again? Probably not as long as the carriers allow consumers to buy new phones for as little as $200. When that changes might just be the signal to sell Apple.
Highlights from the report:
- Operating profit rose to a quarterly record 5.8 trillion won ($5.1 billion) in the three months ended March 31 from 2.95 trillion won a year earlier
- Profit at the mobile-phone business probably more than doubled in the quarter from a year earlier after Samsung introduced the Galaxy Note
- Operating profit may be 200 billion won higher or lower than today’s estimate when audited results are announced later this month (maybe I've not read enough Korean reports, but this statement is scary)
- Samsung probably sold 44 million smartphones in the first quarter, more than tripling from a year earlier. That would exceed Apple’s shipments “by a significant margin,” making Samsung the top smartphone seller during the three-month period
- Profit at the semiconductor division probably fell 28 percent to 1.2 trillion won on sales of 8.65 trillion won
Disclosure: Long AAPL. Please review the disclaimer page for more details.