Source: Apple.
Samsung (NASDAQOTH: SSNLF) just received an injunction from the federal courts this month stating that the South Korea-based tech giant can't sell a slew of its older devices in the U.S. anymore because they infringe on Apple's (AAPL 0.85%) patents.
That doesn't matter all that much now, because the devices are several years old, but it was yet another example of how Samsung has siphoned off ideas from Apple over the years. And it's about to happen again.
It's been rumored since September that Samsung might add an upgrade service, but an article by South Korea's Electronic Times, republished by Reuters, says that Samsung may launch the program as early as March. The upgrade program debut would coincide with the new Galaxy S7 launched in South Korea.
As you may remember, Apple launched its smartphone upgrade program with the iPhone 6s and 6s Plus' debut last September. The lowest-priced 16GB iPhone 6s costs $32.41 per month on Apple's upgrade plan, which is paid out over 24 months and includes AppleCare+. Consumers can select any carrier they want and upgrade their iPhone once every year under the plan.
Upgrade benefits
Apple's iPhone program financier, Citizen's Financial Group, recently said that it has $220 million in iPhone loans on its balance sheet. This led Piper Jaffray analyst Gene Munster to determine that Apple has sold about 250,000 iPhones through the upgrade plan so far. Which isn't a bad start to a program that launched just five months ago.
But the real benefits are likely to come later. Munster believes that over the next few years Apple's upgrade plan will shorten the average time it takes an iPhone user to upgrade their device from 22 months to just 15 months. That's good news in light of recent concerns over the iPhone's slowing growth.
But Samsung's smartphone sales prospects are even more ominous. The company still has global mobile dominance, but Samsung's percentage of total profit that comes from its mobile division has fallen from 70% just two years ago to 37% now.
The drop has come as Samsung has struggled to get users to buy its more lucrative, high-end Galaxy S devices. The smartphones were once a major revenue driver for the company, but a plethora of good-enough Android devices has hampered demand for Samsung's high-end devices.
The verdict
If Samsung does in fact start its own upgrade program, I wouldn't expect it to have the same positive impact analysts are expecting for Apple. While Apple just posted some of its slowest iPhone growth since the device's launch, the company's phones are still the go-to high-end device for many consumers -- and that's not likely to change any time soon.
What Samsung really needs right now is a solid Galaxy S7 launch that reinvigorates the company's user base. If it can do that, and pairs it with an upgrade service, then Samsung's mobile prospects could start looking a little brighter.
