Should Apple Inc. Fear Samsung's Next Wearable?

Samsung's next wearable device could convince some gamers to ditch their Apple iPhones.

May 27, 2014 at 2:30PM

Samsung (NASDAQOTH:SSNLF) is planning its own virtual reality headset, according to a report from Engadget. Samsung's device will be similar in concept to the Oculus Rift and Project Morpheus, and could even beat both those products to market.

Assuming it's a quality product, its release could give Samsung's Galaxy handsets an advantage over Apple's (NASDAQ:AAPL) iPhones.

Samsung moves into VR
Samsung's VR headset, like the Oculus Rift and Project Morpheus, is said to be video game-focused. It will interface with future Galaxy handsets in some fashion, bringing a high degree of immersion to Android games that are written to take advantage of Samsung's hardware.

The move makes sense for Samsung on many levels. Hardware is the company's greatest strength -- it makes the vast majority of the components that appear in its handsets (unlike Apple) and the Korean tech giant has shown its ability to rapidly develop and ship new products in an extremely short period of time: Samsung could releases its fourth smartwatch, for example, before Apple rolls out its first.

Samsung has also shown some passing interest in the video game market, releasing a custom-made controller for its Galaxy handsets in select markets, and designing an SDK for developers that allows them to beam Android games from Samsung handsets to some HDTVs.

The limitations of mobile
Processing power, however, could be a problem. The Oculus Rift is designed to work with gaming PCs: Project Morpheus is intended for the PlayStation 4. Could a Galaxy device really offer something similar? Endgadget's report is scant on details, but if it's a device intended for core gamers, processing power is an obvious limitation.

There's also the ecosystem -- despite a heroic effort from several firms, Android gaming remains more or less in its infancy, with just a handful of console-quality games amid a sea of simple, free-to-play casual games. Will developers write Android games for Samsung's headset? Or will they stick to other platforms, like the PlayStation 4 and PC, where they're guaranteed to find an interested audience?

Samsung's hardware could give it an edge
If Samsung is able to overcome the limitations of its mobile devices and their operating system, it could pose a threat to other handset makers, including Apple.

Various reports have linked Apple to a smartwatch, but nothing like a VR headset. Apple's CEO, Tim Cook, has even vocally downplayed the concept of a head-mounted wearable device. Yet, Cook admits that wearables are the future -- a third branch in the computing landscape.

If that future includes VR, then Samsung could gain an advantage over Apple when it releases its headset. Like its lineup of smartwatches, Samsung's VR solution is said to require a Samsung-made mobile device to function -- buyers who really wanted to use it would have no choice but to switch to one of Samsung's handsets.

Could wearables determine the outcome of the handset market?
Without seeing the device in action, it's impossible to speculate on its potential success. Still, most of those who have played with the Oculus Rift have come away impressed -- Mark Zuckerberg was so impressed he spent $2 billion on the company.

But it does highlight a growing trend: The success (or failure) of a company's mobile handsets could depend on the wearable devices they interface with. If someone really wants Samsung's VR solution, they could be swayed to buy its handsets. By the same token, a consumer who covets Apple's iWatch could choose an iPhone. In addition to paying attention to handset and mobile ecosystem quality, investors will have to keep a close eye on the wearable market in the coming quarters.

Leaked: Apple's next smart device (warning: it may shock you)
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Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. 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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