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

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

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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.

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