Is Samsung’s Galaxy Alpha a Threat to iPhone Dominance?

Samsung appears to want to directly compete with Apple's iPhone. Here's why Apple investors should take this threat seriously.

Aug 5, 2014 at 3:00PM

The leaks keep rolling in on Samsung's (NASDAQOTH:SSNLF) Galaxy Alpha. If the rumors are to be believed, Samsung plans to launch the device this month -- ahead of Apple's (NASDAQ:AAPL) usual September upgrade cycle. While the product specs are still being confirmed, Samsung clearly intends this to compete with Apple's iPhone 6. Apple investors would be wise not to discount this product.

Another iPhone killer? We've heard this before
To be fair, Apple investors have heard this before: BlackBerry, HTC, Google, and Nokia, among others, have held this dubious title, and none of them knocked Apple off its perch. While many experienced success early in the smartphone revolution, more recently the market has become for all intents and purposes a duopoly.

A surprising Canaccord Genuity study seemed to confirm this. When it comes to smartphone profits, probably the best measure of dominance, the report showed that Apple and Samsung had the only profitable smartphones in the third calendar quarter of last year -- taking an astonishing 109% of all smartphone profits. All other handset vendors were left out in the cold during that period.

And as far as Samsung's new effort is concerned, it appears it brings to the table an improved, but not game-changing device. In addition to the new 4.7-inch display is a new metal-based bezel, the camera sports a 12 megapixel camera with autofocus, LED flash and a secondary 2.1 megapixel camera. As far as connectivity goes, it continues to have a differentiator from Apple with the Micro USB port and also continues to bring Wi-Fi and Bluetooth 4.0 to the device.

The problem: Apple is becoming increasingly reliant on iPhones
Compounding the urgency is Apple's increasing reliance on iPhones for revenue. If you look at Apple over the last eight quarters, you can see the company leaned on that signature product. The chart below will give you context:


Source: Apple's 10-Qs/Data Sets.

Although Apple improved in its diversification last quarter, with iPhone revenue clocking in at 52.7%, Apple reported over 50% from one product in seven of the last eight quarters. Last quarter, the reported iPhone sales percentage was nearly 650 basis points higher than the fourth fiscal quarter of 2012.

Even worse, in the high-volume quarters, which for Apple is the holiday-laden fiscal first quarter, the percentage of revenue provided from the iPhone typically jumps over 55% -- as was the case in 2013 and 2014.

In some ways, Apple fans have benefited from a higher percentage of revenue going toward the iPhone. Multiple third-party sources have stated that the iPhone is the company's highest-margin product. If so, Apple has increased its gross margins -- once a cause for Wall Street concern -- merely through favorable product mix. However, overreliance on a single product can make the investment riskier, especially in the face of U.S. smartphone saturation and possible direct competition.

Apple investors should be informed, not afraid
Although Samsung has been Apple's most worthy competitor with its Galaxy line, it doesn't seem the cell phone market is a "winner take all" proposition. Rather, it appears more suited for a comfortable duopoly at this point. In addition, besides a few upgrades, it appears the only tangible difference to Samsung's new phone is that the aforementioned size is smaller than its predecessor -- the Samsung Galaxy S5 -- that clocks in at 5.1 inches to compete with Apple's rumored 4.7-inch display.

However, as Apple's iPhone sales as a percentage of company revenue continues to hover at a high level, Apple fans should watch for any threat to the company's iPhone dominance. CEO Tim Cook has said that Apple is close to unveiling new products -- the tech giant's investors should hope he's right.

Jamal Carnette has no position in any stocks mentioned. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), and Google (C shares). 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers