Source: Samsung
Samsung (NASDAQOTH: SSNLF) could really use a smartphone win after reporting its third-quarter earnings. Overall, the company posted its smallest profit in over two years, falling year over year by 49%, to $4 billion, with quarterly revenue falling 20% during that period. Led by a steep drop of 15% in its mobile business that provided roughly half of Samsung's revenue haul this quarter, the company disappointed investors and analysts alike.
Those looking for a ray of sunshine in the report were disappointed, as even good news had its caveats. IDC found that Samsung is still the world's top smartphone vendor by market share. Unfortunately for the company, its market share of shipments has dropped from 32.5% in the previous year's quarter to 23.8%. Even worse, the data indicated that Samsung shipped fewer phones this quarter than last year's corresponding quarter. No other vendor in the top five reported a year-over-year drop in units shipped -- Samsung shipped 8% fewer units, going from 85 million to 78.1 million.
All in all, these two data points are a harsh indictment for Samsung's smartphone strategy. The company famously pursued a bifurcated strategy with its Galaxy and Galaxy A line competing against Apple's iPhone (AAPL -1.22%) in the high-end market, and a host of smartphone form factors to compete against Xiaomi, Lenovo, and LG in the developing markets. In order to turn around the ship, the company decided to slim its phone portfolio down; but if the newest report from French website NoWhereElse is of any indication, Samsung isn't cutting back in the high-end market.
The A7 beats the iPhone 6 Plus in many key specs
After the disappointing Galaxy S5 rollout, the company introduced its Galaxy A series for release in 2015. The newest version, the Galaxy A7, was leaked by NoWhereElse (via BGR) this week. Boasting a full metal unibody, like the iPhone 6 model, and departing from the Galaxy S line build, the device is actually thinner than the iPhone 6 Plus -- coming in at 6.3 millimeters vs. Apple's 7.1 millimeter size with the same 5.5-inch display.
In addition to mere size, the leaked specs compare favorably to the iPhone 6 Plus for phablet domination: Both have 1920 X 1080 pixel resolution, but Samsung leads with an octa-core, 1.5 GHz processor and 2GB of RAM versus the iPhone 6 Plus specs of a dual-core 1.4 GHz processor with 1GB of RAM. So, on many specs Samsung's new phone appears to be a possible iPhone killer.
An inconvenient fact for Samsung: Most consumers do not buy phones because of specifications and processors
Technology enthusiasts and product reviewers spend a lot of time discussing specs; but for the average consumer, we've kind of hit a point of diminishing returns regarding speed and performance. For perspective, Apple boasts of a 25% increase in CPU performance and a 50% increase in graphics performance with its new A8 chip, and that's on the back of a near doubling of performance from the A6 to the A7 chip with M7 motion coprocessor.
Having faster processors helps with high-demand tasks like gaming, streaming video, and also with lowering power consumption; but outside of the latter, you rarely hear many consumers complaining about performance with Apple's smartphones. I doubt Samsung will be able to steal market share on the basis of better processor specifications.
In the end, Apple is still one of the most innovative companies on the planet. And although Samsung can design phones with similar designs and build characteristics with better specifications, the company is simply not able match the experience of Apple's walled-garden, closed ecosystem. Look for Samsung's mobile empire to continue to struggle in the near term as it fights Apple in the high-end and others in the mid/low-range markets.
