Android OEMs: 1 Wins, 1 Loses

The life of a Google (Nasdaq: GOOG  ) Android handset maker isn't always so glamorous. For some, it can mean the key to becoming the largest phone maker in the world. For others, sales can go down just as quickly as they went up.

A tale of two Android OEMs
Popular Taiwan device maker HTC has fallen on hard times after enjoying a few good years. While it's not publicly traded here in the States, shares have fallen 74% in local trading from highs set last April.

The company just reported second-quarter results, with sales falling 27% to $3 billion. Profits plunged 58% to $247 million. HTC chalked up the weakness to weak macroeconomic conditions in Europe that affected sales, as well as a delay in U.S. smartphone shipments related to losing a patent battle with Apple (Nasdaq: AAPL  ) .

In May, its HTC One X and Evo 4G LTE, a slightly different variant made for Sprint Nextel, saw device shipments being held up by U.S. Customs under investigation for alleged patent infringement. The handsets were delayed indefinitely pending clearance and were soon approved to go about their business.

The company is also trying to rebrand itself and focus more heavily on product depth instead of product breadth, putting deeper development into a fewer number of devices as HTC had become spread too thin over its product line. It's now regrouping with a unified One branding strategy, a new product family with several models.

HTC also continues to focus heavily on China, although it's trying its best to avoid the low end of the market where phones start at around 1,000 yuan. Instead, CEO Peter Chou says he doesn't want to destroy the company's brand value and will concentrate on the medium-end and high-end markets. The problem there is that the high end is dominated by Apple and fellow Android OEM Samsung.

"Leave some for the rest of us!"
South Korean conglomerate Samsung has tapped Android to become the largest mobile-phone maker in the world, dethroning Finnish giant Nokia (NYSE: NOK  ) . While HTC is seeing its top and bottom lines shrink precipitously, Sammy is busy posting record profits.

The company put up a record quarterly profit of $5.9 billion, even though revenue came in just shy of estimates at $41 billion. Samsung also expressed some concern over conditions in Europe. The company just launched the newest version of its popular Galaxy S family, the S III, which is already off to a strong start and robust demand. Within a matter of months, Apple is expected to launch its sixth-generation iPhone, which will escalate competition further.

Unlike HTC, Samsung plays in both the low-end and high-end Chinese market.

Samsung is also on the receiving end of some Apple patent attacks, as the iPhone maker scored a temporary injunction against its Galaxy Nexus, which was released late last year as Google's flagship Android smartphone.

What's the difference?
Why has HTC struggled while Samsung keeps cashing Android checks? HTC even built the first Google Nexus device, the Nexus One, in 2010. Both subsequent Nexus smartphones went to Sammy, though.

For one, HTC got somewhat lazy with its designs, releasing unimpressive follow-ups to popular devices. When you're in a relatively commoditized hardware business competing with rivals using almost identical software (each manufacturer modifies Android slightly), hardware innovation is a requisite.

Samsung is also an enormous and vertically integrated conglomerate, so it can pump out massive volumes of devices built with many of its own components, and has long-standing relationships with wireless carriers all over the world. It's also not averse to using other companies' ingredients when need be. For example, the Galaxy S III uses the same Sony (NYSE: SNE  ) backside-illuminated, or BSI, image sensor as the iPhone 4S, even though Samsung has its own lineup of BSI sensors.

Apple and Samsung are taking over the smartphone world together. There's just not much left for the little guys.

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Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool has sold shares of Sony short and owns shares of Google Apple. Motley Fool newsletter services have recommended buying shares of Apple and Google and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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