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« So National Mints Behaving Like Ostriches? Or is it only Ian Bennett of Canadian Mint who is afraid of mobile money? | Main | Electronic Echoes part 1 on Canadian Mint and Ian Bennett: permalink stains on digital character »

September 30, 2010

Comments

Timo Koola

Thanks Tomi, great post as always. I'd like to hear your insights about couple of things. First, why this multi-OS strategy is perfect for Samsung and would be a grave mistake for Nokia? What harm would it do to create a $600 device with WP7 or Android for selected (read: US) markets while they wait for MeeGo to mature? Arguably Samsung is most like Nokia of its biggest competitors. So why is the Samsung way the Nokia way?

Secondly it is interesting that Samsung seems to do greatly with the same strategy that has failed other traditional cell phone manufacturers Motorola, SonyEricsson and LG. Why do you think this is the case?

Timo Koola

Argh, one very strategic "no" missing from my last comment and no way to edit the comment. So what I meant to say was: "So why is the Samsung way not the Nokia way?" or rather "Why it can't be?"

KDT

I know Tomi hates to equate "success" with "profits" but.....

http://www.asymco.com/2010/09/21/can-android-change-the-profit-share-of-phone-vendors/

I'm not trying to be an Apple cheerleader but that was the only graph I could find of relative profitability of the phone manufacturers.

Sami

They don't love every platform anymore; Samsung just announced they will stop Symbian developer support at the end of the year. See http://innovator.samsungmobile.com/bbs/tech/view.do?boardName=technology&messageId=99534 - considering they will also stop accepting Symbian apps to the Samsung app store, it's a pretty clear signal.

Julian

Great post Tomi right on the money, I firmly believe that their Galaxy S line is going to be very successful, especially since they have deals to distribute the phone on quite a lot of networks across the globe.

I think Samsung is the one that's got the best strategy among all manufacturers, and they are going to get a bigger slice of the high end smartphone market share (where the big profits are made), and particularly they are going to hurt Nokia pretty bad, since they are the only ones with enough power to compete with Nokia in virtually every market and Nokia has been dormant on their high end smartphone strategy.

Pat Smellie

@Tomi. Why do you think Samsung introduced Bada on a low cost phone. Does android require a higher spec device to operate or is the wave in a portion of the market where OS doesn't matter, I just went phone shopping with the wife and she justed wanted to text and talk. The data plan monthly cost eliminated all the smart phones. The galaxy looks to be a great device and will be the top selling Andriod device. I agree Samsung has some great devices, and they get a good portion of the iPhone BOM, via sub components. I have always pondered how much Samsung makes on an iPhone vs selling a low cost phone like the Wave.

Tomi Ahonen

Hi Timo, KDT, Sami, Julian and Pat

good comments, thanks, will respond to each individually

Timo - good question. I think it would be foolish for Nokia to erode its 'own' support of its 'own' OS, ie Symbian, because Symbian is the biggest platform. Nokia needs to support its own platform only (and eventually Samsung will do the same, as Bada matures). The players who don't own a platform - SonyEricsson, Motorola, LG etc will need to pick one or several. Samsung played the multi-platform play well until it launched its own, but now it will need to start to shift business to Bada and we just today got an announcement that Samsung will end Symbian support at the end of the year. Makes sense. Microsoft Phone 7 is not as much a challenger to Samsung because MS doesn't make phones. So they start their consolidation by eliminating the 'real rival' ie Nokia..

KDT - and you know this blog series is not about profits, it is about platform market share. So thanks for the profit analysis for us. This is a cyclical industry, some will make more and some will make less profits. The only real problem is when one player makes losses (like Palm) and cannot remain in the game. Who makes most profits is of interest to investors, this is not an investor blog. We track the innovations in the industry, so our readership is more interested in the reach of the platforms. But as the topic today is Samsung, yes Samsung is very healthy in its profits.

Sami - thanks, you beat me to that story. Thanks!

Julian - I agree, the big fight is not Apple, RIM, HTC. They are the bit players. The big fight is the elephant Nokia and Samsung the young gun who wants the throne. Now that LG stumbled (could have been dark horse a few years ago when were showing very strong growth in dumbphones) its down to those two.

Pat - good questions. On the OS, if the handset maker develops their own OS, they have full control of that part of the phone costs. But it is costly, which is why most phone makers don't bother to try. The big problem with using someone else's OS, is that you surrender the control of your destiny. HTC suffered many times of Microsoft Windows Mobile editions being delayed and delayed, that is partly why they were so eager to jump onto the Android bandwagon. But Android is subject to Google's 'do no evil' world domination plans, and as Android is free of royalties, it means Google is planning to get a ton of advertising revenues down the line from Android phones - and that is a difficult conundrum for handset makers to accept, for the ads could be seen as intrusive and ruin the handset loyalty..

Generally there is a belief that the high end 'luxury' products like the top end smartphones today will make most profit. In an absolute sense, that is defiinitely true of the total profit, but as a profit margin, it depends much on normal business factors, competition and their prices, shipment units and scale in production, distribution costs etc. No phone maker breaks down their profitabilty by device haha, so its up to some analysts to make educated guesses from time to time..

Thank you all for writing

Tomi Ahonen :-)

John Carter

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Generally there is a belief that the high end 'luxury' products like the top end smartphones today will make most profit. In an absolute sense, that is defiinitely true of the total profit, but as a profit margin, it depends much on normal business factors, competition and their prices, shipment units and scale in production, distribution costs etc. No phone maker breaks down their profitabilty by device haha, so its up to some analysts to make educated guesses from time to time..

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I'm not trying to be an Apple cheerleader but that was the only graph I could find of relative profitability of the phone manufacturers.

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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