2 Companies That Should Fear Samsung's Next Phone (Apple Isn't One of Them)

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Unlike Apple (NASDAQ: AAPL  ) , Samsung (NASDAQOTH: SSNLF  ) does not appear to be overly concerned with secrecy. The Samsung rumor mill is nearly always right --  specs for its recently unveiled Galaxy Note Pro had been floating around the Internet for weeks.

That's why investors should take a new report very seriously. According to SamMobile, a Samsung-focused website, the Korean tech giant is about to unveil a phone that could dramatically shake up the mobile market, and put more control of Google's (NASDAQ: GOOGL  ) Android operating system into Samsung's hands.

Samsung responds to its critics
Allegedly, Samsung has made a number of major improvements to its flagship handset, including adding a 64-bit processor and bumping up the screen resolution. But the biggest change could be cosmetic -- Samsung will reportedly offer a version of the phone with a metal body.

The metal bodied phone could be sold at a premium, but would serve to counter one of Samsung's critics' most enthusiastic arguments. Read any reputable tech blog's review of a Samsung smartphone, and you're likely to encounter complaints about the phone's build quality. Instead of using glass and metal like Apple, Samsung builds its phones out of cheap-feeling plastic.

As an owner of a Samsung handset, I actually prefer the plastic design, as it allows for a removable battery and expandable storage. Still, for many people, Samsung's plastic design could be a major turn-off, leading them to purchase a competitor's device instead.

Another Android OEM could bite the dust
While some Apple devotees could be enticed to switch, I wouldn't expect too many of them to make the jump. Apple's customer loyalty remains unparalleled, and though there are reasons to be skeptical of Apple's iPhone business as carriers increasingly move to abandon subsidies, those same trends could take an equally brutal toll on sales of Samsung's high-end handsets.

Instead of Apple, Samsung's new metal flagship is a major challenge to HTC. In recent quarters, the Taiwanese handset maker has rapidly lost market share, and its market cap and profitability have likewise declined.

HTC's flagship smartphone, the HTC One, sold worse than the company expected last year, despite receiving rave reviews. Still, those buyers who did choose HTC's device instead of a Samsung-made handset likely did so because of its body. Writing for the now-defunct AllThingsD, Walt Mossberg, in his review of Samsung's Galaxy S4, lamented its plastic design while praising the HTC One's "handsome, sturdier, aluminum body."

Samsung gains more control over Android
With Samsung offering a metal version of its next phone, it should win over many of the buyers that opted for HTC's One instead. Given HTC's already dire financial situation, Samsung's Galaxy S5 could be something of a knock-out punch, weakening HTC further and perhaps pushing the company out of the handset market altogether.

In the process, Google could lose one of its Android partners. Samsung already dominates Google's Android, with about two-thirds of Android handsets having been made by the Korean tech giant. But its share could rise even further if it pushes HTC out. The Wall Street Journal reported last year that Google executives are fearful of Samsung's dominance, as the company could use its market share as leverage to negotiate a better deal.

If Samsung brings a metal phone to the market, HTC and Google could have the most to lose.

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Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 19, 2014, at 12:58 PM, twolf2919 wrote:

    How many handsets does HTC actually sell? Without that information it is impossible to judge your statement regarding Google being "hurt" - after all Google is gaining partners all the time too - for all we know, HTC leaving the smartphone market may not even be noticed.

  • Report this Comment On January 19, 2014, at 2:24 PM, GaryDMN wrote:

    The Android hardware market is starting to look like the PC hardware market in the late 1980's and early 1990's. Comoditization is in full swing and and there are dozens of vendors with very little differentiation between brands, because they all ran the same software. The Android market is rapidly becoming a commodity hardware market and will be a blood bath as the vendors battle it out on price. Low cost producers win.

  • Report this Comment On January 19, 2014, at 10:48 PM, buyreal wrote:

    If I want a phone that is easy to use and comes with status symbol I buy an Apple. Just go take a survey with school kids from middle school and up and you will see the grip Apple has on them.

    If I want a good, honest Android phone that is guarantee to receive future updates until the hardware is obsolete I buy a Google Nexus phone regardless of who Google has it made by. I don't want all those crap bloatware Samsung loads in their phones.

    If HTC has the entire country's government backing like Samsung did then perhaps it could've survived. However, HTC has several options coming up, either get bought out by Microsoft, Google or a Chinese manufacturer. HTC has its brand reputation that is still worth some market value and if properly invested and marketed, can make a comeback for its future owner. On its own, it has no chance against Samsung's 500 lbs gorilla budget.

    Samsung is the new IBM, it is out there trying to crush all its competitors and very aggressive at it. This is not necessary a good thing for consumers down the road.

  • Report this Comment On January 19, 2014, at 11:22 PM, jim587 wrote:

    Google can't be the looser here too badly, because Samsung phone don't work without Android. So even if HTC goes away, Samsung is not really in a position to strong arm Google too much.

    The other things to consider is A) Google Nexus devices and B) Motorola. Nexus devices are made my Asus or others now, but I would not be surprised to see Google bring them "in house" have have Motorola design and build them. Especially considering the success of the Moto X.

    Once people realize that these a high quality and relatively low cost devices, they will be giving them more than a second look. Add to that Nexus and Motorola devices are likely to be among the first to get the upgrades directly from Google and people will gravitate to them. You might see Samsung's dominance in the space start to fade and Google, itself starts to take more market share.

  • Report this Comment On January 20, 2014, at 2:37 AM, garryWein822 wrote:

    is there any reason why at Montly Fool's sight there is a ticker symbol for Apple , Google and Samsung. But for Samsung the price is down -100%. Does it mean that Samsung went from 200 billion to Zero over night. Or is this Motley Fools ulterior motive or again praising Apple and Google and kicking the shxxxt out of Samsung.

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Sam Mattera

Sam has a love of all things finance. He writes about tech stocks and consumer goods.

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