Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Samsung's Releasing 2 New Phones in 2015; Should Apple Worry?

By Jamal Carnette, CFA - Jul 14, 2015 at 8:00PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Samsung's releasing the Galaxy Note 5 and the Galaxy S6 Edge+ according to SamMobile. Is this phablet overload?

Source: Samsung

In the luxury smartphone market, only two vendors really matter. On one hand, you have Apple ( AAPL -1.17% ) firing on all cylinders with its newest iPhones. On the other, you have Samsung (NASDAQOTH: SSNLF) and its Galaxy S line. While it's still a little too early to call the newest-generation Samsung Galaxy S -- the Galaxy S6 -- a success or failure, particularly with mixed corporate messaging, the previous-generation Galaxy S5 was considered a disappointment and early results point to a lackluster Galaxy S6.

Although the two companies vigorously compete in the high-end markets, they have resisted the urge to release flagship units at the same time. Generally, Apple releases its models in late September to prepare for the U.S. holiday sales season. More recently, Samsung has released the newest version of its Galaxy S line in April.

But if a new SamMobile report is correct, it appears that Samsung aims to release an additional Galaxy S device tentatively dubbed the Galaxy S6 Edge+ in the second half of 2015 to preempt competition from Apple. But it's not the only model that Samsung is bringing to market that day.

Four Galaxy phones and two phablets
Citing "insiders," the site also writes the Galaxy Note 5 will go on sale on Aug. 21. That's a little early, as the Note typically arrives in late September/October, but makes sense when you consider the company is looking to preempt Apple's next-gen iPhone release that typically occurs in late September. But the big news is Samsung is bringing another phablet-sized Galaxy model (the Galaxy S6 Edge+) to market on the same day.

If true, this would expand Samsung's high-end Galaxy line to three models. Luxury competitors Apple and Google currently only have two and one (Google is planning to add a second model with its next-gen units). With the two launches, the traditional April Galaxy launch and the August release of two phablets, Samsung now has four models to compete with. But when it comes to luxury branding, more is not always better and the differences between the two may not even justify the research and development and inventory costs to bring another phablet to market -- especially with the same release date.

In developed markets, Samsung suffers from a branding deficit against Apple. For example, management firm Interbrand found that Apple's brand was worth $119 billion last year, giving Cupertino the No. 1 brand ranking in the world. Samsung's no slouch, either, coming in at No. 7 with a brand value of $45.5 billion.

But in the "perception is reality" world of consumer electronics, many consumer decisions are made first and foremost on brand -- particularly when all other factors are equal or similar. Unfortunately, having too many models has the potential to water down your brand proposition rather than add to it. While consumers appreciate choice, they really appreciate a quality, focused product, and that's what Samsung should work on.

Samsung's earnings show smartphone woes
After the aforementioned disappointment of the Galaxy S5, Samsung was expecting a game changer with the current-gen Galaxy S6 and Galaxy S6 Edge units. It appears that is not what's happening. While Kantar found the company regained the market-share lead from Apple in the three months ended April 2015, that was on the back of the older, discounted Galaxy S5 model rather than the Galaxy S6. Following the report, Samsung provided second-quarter guidance lower than analyst expectations, as many attributed its underperformance directly to the mobile business.

And that makes sense for Samsung to be struggling. A recent report from analyst firm Canaccord Genuity, by way of The Wall Street Journal, found that Apple recorded 92% of all smartphone profits in the first quarter, up from 65% a year earlier. Samsung watched its percentage of total profits drop to 15%. If you're wondering why these totals are higher than 100%, that's because most other vendors lose money in smartphones. Perhaps Samsung's new Galaxy Note and phablet-sized Galaxy Edge+ will reverse this trend, but I doubt it. Look for Apple to continue to dominate the smartphone industry.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$161.84 (-1.17%) $-1.92

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/05/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.