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« If Microsoft Could Just Do ONE Thing Right with Lumia/Nokia/Windows on Smartphones | Main | Early view to Q2 smartphone market share numbers as we get data in - CORRECTED: Nokia (Microsoft) falls out of Top 10 »

July 31, 2014

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Tochi Nwa

This goes to show that market share is a very effective means of ascertaining the health of a mobile company - moreso than ephemral profits.

A fall of 17% is precipitious in this game, it should send alarm bells ringing at Samsung. Any real smartphone fan will not be shocked at this as Samsung has continued to release device after device with less than premium feel made worse by gimmicks and awfully bloated software. They should follow Motorola's lead: cut out the bloat and gimmicks, improve design and play to strength.

Simplify or be doomed.

E.Casais

Possible reasons?

1) Samsung focused on the top-tier, which is crowded with competing manufacturers trying to sell highly priced devices.

2) Advanced smartphone markets are saturated and many undergoing a drawn out recession. Thus, I seem to remember that the Spanish mobile phone market had been contracting in absolute terms, i.e. negative growth.

3) Growth for smartphones comes from Third-World countries.

4) From (2) and (3), this means that the segment of low to mid-range devices is more dynamic.

5) Unfortunately, the offering of Samsung in the low to mid-range is not compelling, whereas Chinese manufacturers are offering good devices ranging low to high-mid range at attractive prices.

Otherwise, the trouble with Samsung does not seem to originate from a technical viewpoint: its devices are advanced, feature-rich, have the best cameras after Nokia/Microsoft, follow the Android evolution closely, and are not troubled by quality show-stoppers.

Gonzo

Finally Tomi, Congratulations.


As I have been preaching all the time, The race to the bottom is in full throttle and Samsung is going to win, while new comers and come back kids
are going to eat Samsung's breakfast, Lunch and Dinner, and we all know that Apple will eat the dessert Alone.

As mentioned in another post, this was so very obvious, like with compaq and any other market share strategy, eventually if you don't make money you fail.

Clever IBM, Sony etc.. that sold the PC division and even more clever from IBM, to hook up with Apple, you might not agree, but it will pay off big time, this has been
in the works and planning for some time.

Samsung glory days are almost over, hey can Kiss China good bye, a huge loss for them, Apple will only sell there to the 10% with $$ regardless of market share
mumbo jumbo, clearly paying off

Predictions for rest of the decade failing a few days after predicted.

Write it down, end of the decade Samsung might still lead BUT not even close to your predictions

Tochi Nwa

The knives are out for Tomi. Blunt knives :o)

RottenApple

Hardly surprising.

The Galaxy S5 was a major disappointment.
I even found the iPhone 5S mostly underwhelming but the SGS5 was even worse compared to its predecessor. Not even remotely worth an upgrade, and even coming from the SGS3 it'd make more sense to choose another option.

As for Samsung's low end offerings, sorry, I'd pass.

Just yesterday I saw an ad in a local newspaper offering a nice lower midrange Huawei phone for approx 65€. Samsung's offerings at the same price point are bottom of the barrel by comparison.

So: If you want to rule the high end, show that you mean business. Samsung failed to do so this year.
If you want to have good business at the low end, at least produce the same quality as your competitors. Samsung consistently fails to do so and cannot even remotely compete with the Chinese.

Add to that their bloated Android modifications and yes, this spells trouble.

It's too early to doom them, of course. Unlike with Nokia, I'm confident that their management is analyzing the situation thorougly and developing countermeasures.

RottenApple

@Tochi Nwa:

"The knives are out for Tomi. Blunt knives :o) "


No surprise there. Apple fanbois love to gloat when someone misanalyzes their competitors.
Apple should still be alarmed, though. In a market where the average high end phone costs €300 (and we'll get there), Apple won't be able to take double of that for a comparable offering. Only the hardest of the hard fanboys would pay that.

Huber

@Gonzo:

Don't count on Apple being invincible - falling prices also mean troubles for them.

I know that some people on this board think that Apple operates in a totally different market, but IMO this is wishful thinking only.

But we will see - soon!

TDC123

Well maybe they should do a Windows Phone :D

youAPPi

As a one quarter difference, "alarming" is putting that nicely. Batten down the hatches, Samsung. The smartphone marketshare battle is about to get nasty.

Wayne Borean


Am half asleep, will do a write up tomorrow. I think that a significant part of the problem is economic (which ties into the fast turnover).

Wayne

zlutor

What will come when all other but Chinese vendors died? Will they be still dirt cheap?

They have to spend (significantly more) money on innovation then that they can save today with 'getting inspiration from other vendors' nowadays...

abdul muis

@Tomi

Sorry to hijack this thread

http://www.phonearena.com/news/Nokia-might-jump-back-in-the-phone-business-with-Android-vengeance-job-postings-suggest_id58863

When Microsoft purchased Nokia, it actually got its Devices&Services division, which hosts the Windows Phone Lumia brand, but also the Asha and other low-cost solutions in Nokia's Mobile Phones section. It also acquired the right to use Nokia's brand, and licensed its mobile-related patents for 10 years, with an option for perpetuity extension, also making itself a preferred licensee of the HERE maps suite for a period of four years.

Nokia, however, retained the right to use its name on future products, the HERE maps suite ownership, and its strong patent portfolio. This seems to be enough for the Finns to try and resurrect their former glory, and, if a smorgasbord of new job postings at LinkedIn is any indication, Nokia intends to do just that. The company is looking to hire engineers, designers and camera specialists with a certain experience, for new devices that are coming down the pipeline.

A few of the listings have already been closed, which might mean that Nokia got their guys, but one in particular piqued our interest - a mobile photography engineer with experience writing camera drivers for Android. Thus, extrapolating from the fact that the hiring spree is done by the same team that issued the Nokia Z launcher in the Play Store, we might very well be looking at an Android-powered future for the Nokia that were. What do you think, do the Finns have a chance to stand on their own in the overcrowded land of the little green robot, considering that Nokia's best mobile technologies, like the PureView camera brand, and the ClearBlack display filter, are now exclusive to Microsoft?

bruno1024

That second picture pretty much sums up why Nokia collapsed. That level of connectivity today is still missing from all smartphones. Nokia N8, E7 and few more could be connected to tv out of the box without much hassle with dlna or other semi-standard technologies that aren't available on most tv sets. So, why is second picture important? Because nobody knew about it. Nokia had device that could easily be laptop-like gadget, but they forgot to tell people.
How can you sell something if you don't tell people what are your devices capable of? Just imagine if apple had device with such connectivity? Steve Jobs would glorify that device like nothing before. And Nokia? No marketing whatsoever. Nothing. Zero. For a phone like that? Phone that could stream 720p videos via hdmi cable, that had options to connect mouse and keyboard. Nokia didn't make no marketing effort to tell people for it. That's sad...

bruno1024

o sh**! my comment is related to this article http://communities-dominate.blogs.com/brands/2014/07/if-microsoft-could-just-do-one-thing-right-with-lumianokiawindows-on-smartphones/comments/page/1/#comments (July 31, 2014
If Microsoft Could Just Do ONE Thing Right with Lumia/Nokia/Windows on Smartphones)

my bad...

n9

Commoditization is what we are seeing in the smartphone area, some brands will retain a bit of value but overall margins will substantially drop.
Se the case of the OnePlus 1 smart phone that as unbeatable hardware for only 300€. and we will see more and more devices like this.

Gonzo

@ Hubert;

Never considered apple invincible, they are just not racing to the bottom. In fact this Q should be bad, only people living in caves don't know the iphone 6 will be out soon. And hey ! Apple will have bad and good quarters but focusing on it's loyal crowd of the 8-10% … it 600 million users. Amazon - 300 million credit cards, Apple has 600 million… imagine the possibilities and with IBM driving it into the enterprise… just a 3% growth in the segment is huge.

Remember … Imac without floppy, ipod too expensive, ipad is a big ipod, telephone without keyboard … blablabla apple is dead?

@ Tomi

Here are the latest news: but we knew that ! Samsung LOST 8% to Xiaomi in China, if it would have been apple the it would read " armageddon apple is dead, bloodbath no more as apple has no more blood to bleed", it seems that samy sam sam is loosing BIG in one of it's largest potential markets to …. PRICE WAR market share strategy !

Xiaomi, the Chinese smartphone maker with the diminutive name, became the leading smartphone vendor in China in the second quarter, with its shipments exceeding Samsung for the first time
Xiaomi led China’s second-quarter smartphone shipment rankings with 14% market share, following by Samsung, Lenovo and Yulong each with 12%. It’s quite a jump from the first quarter, when Xiaomi’s 10.7% market share trailed Samsung’s 18.3% and Lenovo’s 11%. And an even bigger leap from a year ago, when Xiaomi only held 5%.

RottenApple

@Gonzo:

What makes you think that Apple may sustain its high pricing once the market settles for $400 or less for a high end device? You have to face the fact that of those 600 million users there may be 10% who are devout supporters of Apple no matter what. The rest buys iPhones because it's economical to do so, e.g. the pricing in the US clearly favors expensive devices. But that only works because other high end phones cost just as much.

So once the race to the bottom starts, Apple will be caught up in it in one way or another because the one thing they cannot afford is to be priced out of the competition.

AndThisWillBeToo

@RottenApple
You must be first in this forum to say that it is economical to buy iPhone. U.S. market as an exception doesn't justify such a thought as majority of iPhones are sold outside U.S. (said by Apple CEO).

RottenApple

So? Where's the contradiction there? Right now Apple's price matches the competition's price for high end.
What I said will become relevant if the competition's high end prices start to fall - and that they will.

It also doesn't mean much that Apple sells more outside the US than in the US. The rest of the world is what? 20x more people, 30x more people? So even with a tiny percentage they'd sell more outside. But it remains a fact that their best markets are those where no real competition on hardware prices takes place.

Baron95

Why is it alarming? Didn't I tell you over a year ago that Samsung's share would nose dive in 2014 as the Chinese Android OEMs branched out of their niches (already happening - Xiaomi surpassed Samsung in China this quarter BTW), and Apple launched larger screen iPhone 6 (6 weeks away).

Samsung is the most vulnerable company in mobile right now. They have high costs (compared to the Chinese Android OEMs), rely on massive marketing spend (Xiaomi by contrast is word of mouth, and web sales. And now its big screen advantage vs Apple is about to vanish.

Your darling will suffer nightly. Just like your previous darling - Nokia.

RottenApple

@Baron95:

You are forgetting one thing that will eventually harm Samsung and that was already mentioned several times here:

Although they are market leader, they are not the most liked manufacturer. And I have the feeling that the attitude toward bloatware infestation on mobile and ill-advised custom UIs is turning around - and here Samsung consistently gets the worst ratings and so far they seem incapable of realizing this.

They lead the market because they rule the shelves in the electronics stores.

Baron95

@Rotten

I think Samsung makes good phones, tablets, etc. That is not the issue. The issue is that they can't escape the commodity position of being an Android OEM.

Sure, for a while, having the massive resources for the marketing campaigns, the large screen production capacity, etc, helped. They are also a good brand from TVs to refrigerators, etc. So a powerful and very capable company.

They are just not Apple/Google capable in the SW/IntenetServices space, nor as hip and inexpensive as XIaomi in the low end space. That puts them in a tight squeeze.

Nothing precipitous about to happen, but a steady erosion of margins and volumes.

The saving grace, is that unlike lazy, bloated Nokians (now finally being fired by Microsoft), Samsung is a better managed company and much more aggressive. So they will do better than Nokia as their share declines.

But again - not a single European company anywhere in sight in mobile handsets. Where are the market leaders that were so far ahead in mobile now?

Winter

@Baron95
"The issue is that they can't escape the commodity position of being an Android OEM."

These are the wonders of a free market with competition. Users get quality gear cheap. That is one reason I like Android.

@Baron95
"The saving grace, is that unlike lazy, bloated Nokians (now finally being fired by Microsoft),"

Blaming the victim seems to be very popular. But we know, it is much more easy to kick the victim when he lays down than calling names at the aggressor.

@Baron95
"Samsung is a better managed company"

Than Microsoft, indeed.

I have seldom seen a big company that is able to run profitable companies into the ground so well. They are in a league with the East German communists before the fall of the wall.

@Baron95
"But again - not a single European company anywhere in sight in mobile handsets."

Indeed, all electronics are produced in East Asia nowadays. That is because the wages are so low there. Btw, the machines that are needed to produce all these electronics are made in Western Europe.

But I know what what concerns you most is that the profits go to the US.

RottenApple

@Baron95:

"I think Samsung makes good phones, tablets, etc. That is not the issue. The issue is that they can't escape the commodity position of being an Android OEM."


I'm not so sure that this is all. Considering that Samsung this quarter more closely matched Apple's cyclic developments, one may assume that the same reasons are behind it, namely no new product of sufficient market power to keep their market share afloat. We all know that the SGS5 sold far below expectations, and the main reason for that clearly is that it was not meeting customers' expectations - they probably just mostly stuck to their old phone instead of having it replaced.

A company like Samsung can't exist on low end sales alone, there's far too much competition there. But with nothing substantial to offer in the high end as well they left a disastrous impression this quarter.

Spawn

@RottenApple

> Although they are market leader, they are not the most liked manufacturer.

Exactly. It got even more worse last quarter when Samsung introduced region-lock resulting in customers ending with bricked devices, Samsung support couldn't help, Samsung management keeped complete silent. Months of bad press, angry customers, no single word from Samsung.

I am sure this had effects at a much larger scale then told at least in europe and latin america. Even mainstream-press reported about 'Samsung problems' and it was omnipresent for weeks. Lot customers reported there phone, after working for a while, just locked itself. Most worse situation if you cannot trust your main computer to work tomorrow too. To top it, it happened a lot with people abroad while they where depending on this device to work.

You not do that to customers. Such things spread and they are a big nogo for Samsung products. I know I would not buy Samsung again. I need to trust my min. my only pocket-computer to keep working.

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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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