Samsung (NASDAQOTH:SSNLF) could be on the verge of unveiling a new phablet, one lacking the company's signature stylus.
Originally reported by Italian site HDBlog, Samsung is allegedly planning to release a larger version of its Galaxy S6 Edge sometime in the near future. Admittedly, this remains a rumor -- there has been no official confirmation from the Korean tech giant -- but it appears highly credible. SamMobile has since corroborated the report, and late last month, Samsung filed a trademark for the "S6 Edge+" with the U.S. Patent and Trademark Office.
Offering two different phablets wouldn't be surprising for Samsung -- the company has an established history of flooding the market with many different devices -- but splitting its phablet line and ditching the S-Pen could put it at a disadvantage.
The one difference between the Galaxy Note and the iPhone 6 Plus
Samsung wasn't the first company to offer a phablet, but it was the first to popularize it. The original Galaxy Note, released in 2011, was widely mocked, but ultimately went on to become a massive success. Subsequent generations sold tens of millions of units, and it's clear that the Galaxy Note line served as a key inspiration behind Apple's 5.5-inch iPhone 6 Plus.
But the Galaxy Note has always had one extra feature besides its massive screen. Since its first iteration, Samsung has bundled its S-Pen smart stylus with every Galaxy Note device it's sold. Over the years, the S-Pen has gained additional features and accuracy, and it may have encouraged some artistic-minded consumers to choose a Galaxy Note over a competing device.
Besides the Android operating system, the single most distinguishing feature separating the Galaxy Note 4 and the competing iPhone 6 Plus is the S-Pen. And that's true for the other Android OEMs Samsung competes with, too. Though LG and HTC (among others) have followed Samsung in releasing larger phones, none have copied the S-Pen.
Developer support has been modest
One issue that Samsung has long had to contend with is its ecosystem, or rather lack thereof. Unlike Apple, which has the sole rights to the iOS operating system, Samsung relies on Android, a mobile operating system employed by dozens of other manufacturers.
For a time, Samsung was the only company offering quality Android handsets, and after that, the only company offering large-screen phones: but both of these advantages have eroded. Samsung handset sales have plummeted as other manufacturers have caught up. According to research firm IDC, sales of Samsung's smartphones dropped by 50% in China in the first quarter.
The S-Pen, however, is still something completely unique to Samsung, and a building block it can use to distinguish its devices and maintain its profit margin. Samsung has attempted to build an ecosystem around the S-Pen, releasing special APIs for developers, and has even paid out prizes to winners of S-Pen-focused competitions, but not many third-party apps support it. Although there are hundreds of millions of Android devices in use globally, only a small share (relatively speaking) are packing the S-Pen. For many developers, supporting Samsung's stylus may not be worth the effort.
Still, it's been getting better. There are a few big names -- like Twitter -- that have added S-Pen support into their apps, and there's even a game (Scribble Racer) designed with the S-Pen in mind. Unsurprisingly, there's a lot of sketchbook software that takes advantage of the S-Pen. This is a great development from Samsung's perspective, as anyone that wants to use this software to the fullest extent must go with one of Samsung's Galaxy Notes.
Offering a large Galaxy handset without the S-Pen could reverse whatever gains the S-Pen has made. Some potential Galaxy Note buyers will likely choose the S6 Edge+ over the Note -- a move that will only splinter Samsung's customer base further and make the S-Pen even less attractive to developers.
Samsung's mobile business is in decline
It also goes against what Samsung's management has been promising. Last year, Samsung said it would reduce the number of different Galaxy models it offers in an attempt to shore up its mobile business. Offering a variety of different handsets can allow it to capture more customers, but it brings additional costs and may confuse consumers.
Samsung's mobile business has been in decline for nearly a year. The company remains profitable, but to a much lesser extent than before. Last quarter, Samsung's profit fell 39% year over year, worse than analysts had anticipated. Its mobile division in particular saw its profitability fall 57%.
The release of the Galaxy S6 and Galaxy S6 Edge were expected to reverse that trend. But according to a recent report from BusinessKorea, they haven't sold as well as expected, and Samsung will once again report a profit decline for the second quarter.
Samsung will likely look to the the Galaxy S6 Edge+ and the Note 5 to stop the skid in the second half of the year. But putting out yet another model -- a strategy Samsung has long relied on -- may not solve the problem. In fact, it may undermine the ecosystem Samsung was building around the S-Pen, and ultimately do more harm than good.
Sam Mattera has no position in any stocks mentioned. The Motley Fool both recommends and owns Apple and Twitter. 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.