If Android is so hot, why are Samsung, HTC, and Motorola struggling?

“Back in 2010, I coined, somewhat prematurely, the phrase ‘The Great Smartphone Bear Market,'” Michael Comeau writes for Minyanville. “The idea was that the smartphone market was growing at an extraordinary rate, but nobody was really making any money, aside from Apple.”

“Since 2009, the major story in the industry has been how rapidly devices powered by Google’s Android operating system have taken market share from the ecosystems of Apple, BlackBerry, Microsoft, and Nokia,” Comeau writes. “So building Android phones is a great way to make money, right?”

“Wrong,” Comeau writes. “There’s an interesting storyline playing out if one dials down to a company level: The top Android phone makers — the aforementioned Samsung, HTC, and Motorola — aren’t doing all that well. Samsung and HTC both reported lower-than-expected earnings in July. Samsung’s stock is down 20% year-to-date, while HTC is down a whopping 50%. HTC is not only seeing its sales slide, but it also has collapsing profit margins and may actually post a loss in Q3. And year to date, Motorola has actually posted an operating loss of $397 million for Google.”

Read more in the full article here.

40 Comments

    1. Their stock is down 20%, they decreased build of S 4’s by millions of units, and their profit on smartphones are minimal. Yeah, not struggling at all. Everything is peachy.
      Owning a Samsung device does not require you to turn off your brain. Or maybe it does.

    1. Android is the new MSFT paradigm, completely riddled with old problems of MSFT OEMS pitted against each other and a second rate OS with more security issues than solutions.

      Why the fandriods can’t see this or the entire analysts community likes to pretend that this is not the case is a whole another problem. There are so many striking similarities to the 90s Apple vs. MSFT that I am having a serious case of deja-vu.

    1. Actually it should read:
      “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.” – Abraham Lincoln.

      I personally like the part: “some of the people all the time”
      That is why I pick my friends very carefully.

        1. The attribution to Lincoln goes back to McClure’s book Lincoln’s Own Yarns and Stories (1901). Since McClure was a personal friend of Lincoln it’s plausibly true. However, you’re right in that there’s no evidence more direct than McClure.

          As for the sentiment, there have been an awful lot of fools fooling about for a long time… 🙂

  1. Apple is down because Google and Samsung ambushed them at the pass. Samsung down because, well, people are figuring out Android is just not worth it at any price. Once people figure it out, the analysts cannot be far behind ! Apple is about to enter its renaissance. You heard it here first: The Apple Renaissance.

    1. I already see SGIV BOGO sales, if they are doing so great, why do they feel the need to give away their flagship phone when you buy their flagship phone. If APPL ever did move trade profit for market share, could you imagine what the anal-cysts and fandroids would be saying? Oh man and we thought it was bad now…whheww, I am glad that day will never happen, cause APPL would never do it for one cause they can barely build enough to make to sell let alone another to give away.

  2. Apple created the market and have taken the high end section.
    Other companies followed but could only compete by lowering prices. That leads to large market share gains. Samsung has taken the majority of market below Apple’s and offers multiple versions at different price points. The rest of fighting for the scraps. M$ rise is interesting but hard to tell if this is shipments or true sales.
    So this is a classic case of see an opportunity and make money from it as soon as you can. Samsung has done this but it looks like their margins are slipping and may not be making the same level of profits as before. Note that they sold over 5 time more phones than Apple last quarter but made less profit in that segment. Smells like a Dell to me.
    Apple’s next move is clear. Start making phones to grab the next most profitable segment and squeeze the competition downward. It’s a win-win because a good percentage of customers using a Samsung phone will be dissatisfied with the quality and trade up to an iPhone. The low cost iPhone will enable customers to buy in at a cheaper cost and pave the way for buying a more expensive model later on.

    1. Whether it’s shipments or sales in MSFT’s case, what is being forgotten and not revealed by MSFT’S is the number of returns. From what I see, the returns are nobly high, but happen very quickly after purchase.

  3. Samsung appear to be doing less well than previously, but the problem is that they are very secretive about their accounts. They don’t release proper figures for units sold to end users, but instead offer private guidance to selected analysts about claimed shipping numbers and those analysts conjure up figures which other people assume to be genuine.

    Furthermore, Samsung has recently been spending a colossal amount on marketing and promotion. It appears that they have realised that such a level of spending is unsustainable, so it remains to be seen what will happen to their market share once the promotion budget is trimmed.

    Samsung don’t worry about tiny details like being honest or transparent, so there are lots of ways that they can confuse the picture in order to make themselves look better than they really are, but they can only get away with that for so long.

    Gradually people are noticing that things aren’t quite as Samsung would have us believe. People don’t like being taken for fools.

  4. Apple’s decline has mostly been based on fear of declining growth and declining gross margins. That fear was heightened after the second quarter financial “miss.” In large part, that was due to an unreasonable YoY comparison to a 2012 quarter that included a blip in gross margin to an unusually high level of around 42%. The lower, but still quite healthy gross margin in 2Q2013 resulted in lower YoY profits even though total revenue increased modestly. Unit sales of Macs and iPads were also lower than predicted by some. Investors and analysts were looking for evidence that Apple’s growth was slowing, and the media had already been pushing that perception of doom and gloom for months.

    Samsung’s recent decline is also based on financial data. But I believe that the investor concerns relative to Samsung have more basis in fact and less in vague fears and theories of large numbers. Samsung has been the only Android handset vendor to achieve substantial profits to date, but it appears to be stuffing inventory channels and competing in a race to the bottom with other Android handset vendors.

    Therein lies the difference that investors should note. Apple has been highly successful at maintaining prices and margins on the iPhone since 2007. While some declines in prices and margins might reasonably be anticipated as a result of Android competition, it is much better to start from a highly profitable position with margins close to 40% and rationally respond to competition than to start as the sole somewhat profitable bump in the Android handset market hoping to squeeze out profits from unit sales that are concentrated in the low- to mid-range with other bottom-feeding competitors.

    Time will tell. My money is on Apple and AAPL.

    1. you state, “Apple’s decline has mostly been based on fear”
      and then, ” I believe that the investor concerns relative to Samsung have more basis in fact”

      Would you please expound on the facts? An objective observer would strongly question why you can so easily dismiss problems that have been identified with Apple but then leap to the conclusion that Sammy (despite all business performance to the contrary) has significant problems. The headwinds in the mobile industry affect everyone. The only structural or financial issues Sammy has arise from the fact that it is busy plotting its break away from Android, which will take time and money.

      1. It’s very hard to be strictly factual when comparing Samsung’s financials to Apple’s. Samsung are very vague about how many units they sell, their overheads and profits.On the other hand, Apple publishes precise figures which are properly audited.

        Much depends on how much you trust Samsung. I would suggest that the evidence reveals Samsung to be very untrustworthy for multiple reasons, so the logical conclusion is that you should treat their financial results with a certain amount of scepticism,

  5. It’s a long marathon, not a sprint.

    Like it or not, Samsung/Android’s progress has eclipsed iOS. Samsung is NOT struggling. Their copiers are running as fast as ever. But of course, by releasing more handset options than Apple ever dreamed of, not to mention providing iPhone chipsets that Apple inexplicably can’t or won’t make internally, Sammy’s profits are easily continuing to pull away from Apple. These are facts, and it’s time the MDN fanboys came to grip with reality. You can’t continue to pretend Apple is a cute underdog computer company that quietly takes all mobile profits. It the two-horse race, Apple is now showing itself as the fat slow corporation, and it is falling behind in many objective measures.

    Apple could turn it around, but to do so Apple would have to serve more people in more global markets at more price points as Samsung does. If Cook chooses not to do so, then MDN might as well give up on all the disparaging postings about Apple’s competitors who found a way to serve the world market profitably.

    The thing is, the current two-horse race could very easily end up with Apple falling hopelessly behind if it can’t find another smash hit product. Samsung alone sells twice the handsets that Apple does, and it is not losing money. The handset makers that did lose money are the ones that truly sell junk, or the ones who just spent several years retooling their companies (BB, Motorola, Nokia). It would be foolish to write off those 3 just yet.

    Bottom line: Apple is choosing to marginalize itself. It could do better by learning a trick or two from Samsung’s substantial global success.

    1. I agree that Apple should take charge of more of its supply chain especially with respect to displays, memory, storage, and perhaps cameras.

      I also feel Apple should leave the competition no price umbrella at the low end. Android’s success, such as it is, is of Apple’s own making. They stayed exclusive to AT&T for far to long after Google tossed its Android grenade into the mobile market following the popularity of the App Store.

      If Apple can make a lower priced unit and still maintain margins I say they absolutely should do so.

      1. The example is right there for a lower priced unit.
        Android phones – What do you get for that lower price? Junk

        “If Apple can make a lower priced unit and still maintain margins I say they absolutely should do so.”

        Apparently they cannot, or as Steve Jobs said about making $200 low end Macs. Can’t do that and still have good quality.

        I myself do not want a junk cell phone that will fall apart after 2-3 years.

  6. Too many people like to compare “Android” to iPhone and the problem with that is…

    “Android” is actually made up of different platforms from different OEMs. Furthermore, Android is not a true application platform, it’s an operating system for building platforms; Amazon with Kindle, Samsung is slowly moving away, several Chinese OEMs have stripped Android down, etc.

    It’s like using “earthling” to describe an American, but that American isn’t representative of all the people on Earth, there are many different cultures and countries.

    This is why “Android’s” numbers aren’t really worth much and why a clearer picture is made when you pull it apart and look at what’s going on with all the parts that you see all the issues and disparate ideologies.

    The iPhone, on the other hand, is actually only a single part of a much larger platform controlled by one company.

    This would be calling an American an earthling. Yes, this is true but, there are people from other countries and cultures that are also earthlings, just as there are other entities that make up what is the iOS ecosystem.

    Those who look at a single statistic and make declarations about the whole of the platform, aren’t seeing the forest for the trees – they’re probably not even bothering to look for it.

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