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

Samsung is reportedly making a major change to its next smartphone. Why Google, not Apple, could be most affected.

Jan 18, 2014 at 2:00PM

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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Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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