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Samsung's Strategy to Beat Apple Inc's iPhones: Launch the Galaxy Note 5 Sooner  

By Chris Neiger - Jul 14, 2015 at 4:00PM

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Samsung's new tactic against its strongest competitor is to get its new Galaxy Note 5 out the door sooner.

Let's not beat around the bush: Samsung (NASDAQOTH: SSNLF) is scared of Apple (AAPL 2.14%). Amid stalling sales of its flagship Galaxy S lineup and continually decreasing mobile profits, Samsung is desperate to find its footing as it battles the popular iPhone 6 and 6 Plus. 

Its latest attempt, according to The Wall Street Journal, is to bump up its launch of its new Note 5 phablet from this coming February to next month. The earlier release would circumvent a timing dilemma Samsung had last year when it introduced the Note 4 days before the new iPhones, but started selling the devices a few weeks after Apple's latest devices went on sale. 

Samsung's in the odd position of being the world's No. 1 smartphone vendor, yet having its profits continually decline -- and it's trying everything it can to reverse that trend. 

If you can't beat 'em, launch earlier
For a few years Samsung held the upper hand in the so-called phablet market (devices larger than most smartphone displays but smaller than tablets). But when Apple introduced the 5.5-inch iPhone 6 Plus last year it started a head-to-head competition for Samsung's 5.7-inch Note. 

Samsung's Galaxy Note 4. Source: Samsung. 

Apple's larger iPhones have been nothing short of a major success for the company. In fiscal Q1 2015, Apple sold more iPhones than any other previous quarter -- a total of 74.5 million -- with the new devices being a major driver of those sales. That allowed Apple to temporarily take the top-selling smartphone title away from Samsung at the end of 2014. 

But more importantly, the competition between Apple and Samsung, along with increasing competition in China, has weighed Samsung down. 

Last week the company announced its Q2 2015 preliminary results, showing that operating profit fell by 4% -- the seventh consecutive quarter of year-over-year declines. The company's mobile business is to blame, with analysts expecting a 28% drop in mobile profit for the quarter on slowing Galaxy S smartphone sales, production miscalculations, and increasing competition in China. 

Meanwhile, Apple's found success for its latest devices not just in the U.S. market but in China as well. The country is now Apple's largest smartphone market, and the company enjoys one of the strongest brand loyalty there, along with a growing developer community. 

If all that weren't enough, Apple continually takes home the vast majority of smartphone profits compared to Samsung and its competitors. A new report by Canaccord Genuity, obtained by AppleInsider, shows that Apple accounted for 92% of the smartphone industry's operating income in the March quarter, even while it held just 20% of the market.

Can an early launch work?
I'm skeptical the Note 5's early launch will be enough to get consumers to open their wallets for Samsung instead of Apple, but I don't fault the company for trying a new launch strategy. Apple tends to dominate the technology news cycle whenever it's debuting new devices, particularly for its revenue-driving iPhones. 

The one thing working in Samung's favor this year is that Apple's iPhone updates are likely to be smaller, incremental changes -- instead of the major revamp of both devices that we saw last year. But even if Samsung succeeds with its earlier launch, the company is still fighting an uphill battle that can be won with an earlier device launch. 


Chris Neiger has no position in any stocks mentioned. 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.

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