It's safe to say the last generation of Samsung's (NASDAQOTH:SSNLF) high-end Galaxy smartphone line -- the Galaxy S5 -- didn't live up to expectations. After the tremendous success of the Galaxy S4, the company stumbled to differentiate its follow-up unit and sales struggled. While Samsung has been rather silent on Galaxy S5 unit shipments, last year The Wall Street Journal reported that sales were 40% below management's expectations.
As a result, Samsung's important mobile division has been struggling; over the last three reported quarters, the company's mobile operating profit dropped year-over-year 74%, 64%, and 57%, respectively. In the luxury smartphone markets, Samsung also faces a resurgent Apple, which is seeing strong demand for its larger form-factor iterations of the iPhone. Simply put, it's been a tough year for the South Korean electronics giant.
Recently, however, a decidedly more positive tone has emanated from Seoul. The company released its newest Galaxy smartphone -- the S6 -- to strong reviews. For the Galaxy S6, Samsung followed Apple's lead by focusing on style and design and sacrificing a few features. And while it's still early, many signs point to the Galaxy S6 being a success. But don't count Consumer Reports among its fans. The publication thinks you should buy a Galaxy -- just not the S6.
And the survey says...
Although the market has judged Samsung's Galaxy S5 harshly, Consumer Reports hasn't. The S5 was the top pick in Consumer Reports' latest ranking of smartphones, with an overall rating of 79. It edged out the LG G3 (78) and Apple iPhone 6 (77), mostly on the basis of battery life. The lower price of the noncurrent unit is a nice bonus as well.
The new Samsung Galaxy S6 equaled the iPhone 6 with a score of 77. Consumer Reports downgraded the unit from its predecessor on camera image quality and lower battery life, but upgraded the device on its "phoning" rating that judges the interface qualities of making and receiving a call.
In a three-minute YouTube video, Consumer Reports explained its rankings and pointed directly at the design changes for the downgrade. Electronics testing chief Maria Rerecich blamed the loss of the removable battery, the loss of the microSD slot, and the loss of the water-resistance rating as reasons the S6 rating lower than the S5. These changes were all due to Samsung's decision to copy Apple's unibody, premium-materials build.
Trade-offs and customer segmentation
Naturally, any producer is faced with trade-offs -- for Samsung, management decided the Galaxy's plastic backing was losing design-oriented consumers to Apple's premium build. A removable memory card and battery are nice features, but Samsung determined that design was more important to prospective shoppers.
While a decided contingent of users prefers the Galaxy S5's optionality, these changes probably won't force users to defect to another luxury vendor. In the end, the luxury smartphone market is mostly a duopoly between Apple and Samsung -- and Apple lacks these features as well.
Customer segmentation might also be at play in the ranking. Consumer Reports' demographic tends to trend a little older than the target market for luxury smartphone buyers; a report in late 2013 pegged its average reader over 60. It is always difficult to reflexively assign traits via demographics, but it's entirely possible Consumer Reports' readership -- and, thus, its reviewers -- values a removable battery, more memory, and water-resistant design more than the upgraded processors, specs, and ecosystem Samsung is targeting with the Galaxy S6.
If you are firmly in the camp that considers a removable battery, waterproof design, and removable memory card essential, you can now buy the Galaxy S5 at a reduced price.
Jamal Carnette owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool 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.