2 Enormous Tech Giants Will Challenge Apple and Google Later This Year

Apple's (NASDAQ: AAPL  ) iOS and Google's (NASDAQ: GOOG  ) Android firmly control the U.S. smartphone market. According to Consumer Intelligence Research Partners, the two operating systems collectively powered roughly 95% of the phones sold in the U.S. last quarter.

Despite their overwhelming dominance, it appears that two new challengers are preparing to enter the market this year: Amazon (NASDAQ: AMZN  ) with FireOS, and Samsung (NASDAQOTH: SSNLF  ) with Tizen. Although the odds are stacked against them, investors shouldn't discount their potential.

Amazon's smartphone appears
Last week, images of Amazon's long-anticipated smartphone finally leaked onto the Internet. With a 4.7-inch screen and six cameras, Amazon's handset should compete with Apple's iPhone and many of the flagship handsets running Google's Android, and for a number of reasons it could be successful.

First and foremost, Amazon's smartphone should ship with plenty of apps. Alternative operating systems -- BB10 and Windows Phone -- have been severely hamstrung by their lack of apps, but purchasers of Amazon's smartphone won't have the same problem. As FireOS is simply a modified version of Google's Android, most of the major Android apps are available for Amazon's operating system.

Those app creators have ported their apps to Amazon's store primarily because of the runaway success of its tablet business. Although Amazon doesn't offer up exact sales numbers, it was the third largest seller of tablets in the fourth quarter of last year, according to IDC. Amazon's established tablet business could carry over into the smartphone space, as satisfied Kindle Fire owners purchase Amazon's smartphone -- apps and movies purchased for their Kindle Fire tablets would easily carry over to their Amazon smartphones.

Samsung says it will finally launch a Tizen phone
While Amazon's management has remained mum on it smartphone aspirations, Samsung has been explicit in its plans to move forward with Tizen. Earlier this month, Samsung launched the Gear 2 and Gear 2 Neo smartwatches, both of which run Tizen, and Samsung has promised to ship a smartphone powered by the operating system this year.

Samsung has been working to generate interest in the operating system in recent months, including a contest designed to entice mobile developers to code for the platform. As the largest smartphone manufacturer in the world, with a dominant supply chain, large advertising budget, and relationships with carriers around the globe, Samsung is well positioned to introduce a new operating system.

Reasons to doubt Samsung and Amazon
Yet even with their many advantages, the odds are still stacked against both upstart operating systems.

Samsung's Galaxy phones are massively popular due, in large part, to the fact that they run Google's operating system. Although Samsung may dominate when it comes to hardware, its software skills are far less established -- reviewers are often critical of the software modifications Samsung makes to Google's operating system. Perhaps more importantly, Samsung's Tizen phones won't have the robust app ecosystem its Android-powered Galaxies offer. Samsung has been successful in getting some major tech firms to support its Tizen watches (including PayPal), but Tizen lacks the deep bench of apps Google's Android and Apple's iOS offer.

Amazon, too, could have an app problem. While the most popular Android apps are available for its Kindle Fire tablets, not all of them are. Some, like Google Maps, aren't, and likely never will be, given that FireOS, by design, excludes Google's services. Amazon's Kindle Fire tablets may have been able to thrive without Google Maps, but a navigation app is practically a necessity for a smartphone.

Moreover, one of Amazon's biggest advantages could be useless when it comes to the smartphone market. In the past, Amazon has pitched its Kindle Fire tablets as a cheaper, yet just as capable, alternative to Apple's iPad. The problem is that, unlike tablets, most smartphones (at least in the U.S.) are still bought on two-year contracts with generous carrier subsidies. Even if Amazon undercuts Apple's iPhone significantly, consumers on subsidized contracts are unlikely to care.

Threatening the duopoly
That said, Amazon and Samsung's new smartphone operating systems are definitely a threat to Google and Apple's dominance. Google, in particular, could be on the hook, as longtime Android users may be more likely to choose a somewhat familiar operating system (FireOS) or familiar hardware manufacturer (Samsung). But Apple could still be pressured by rising competition.

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  • Report this Comment On April 22, 2014, at 11:47 AM, smauney wrote:

    New York Times financial articles are written by 3rd graders. Example: "Netflix on Monday voiced strong opposition to Comcast’s planned $45 billion takeover of Time Warner Cable, even while confirming that it was raising subscription prices." - Hahaha! That's adorable.

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