Why Is Everyone Suddenly So Pessimistic About Samsung?

Posted by Mark Stone

This wasn’t supposed to happen.

News from Wall Street Journal this week regarding Samsung paints a pretty shaky picture for Android’s top smartphone manufacturer.

It’s been almost two years since we’ve seen a new iPhone from Apple (the 5s being just a slight upgrade), and Samsung was expected to take full advantage. Between iPhone launches 5 and 6 (the latter is expected to be announced on September 9) in the major smartphone market Samsung has released the Galaxy S5, the Note 3 and the upcoming Note 4 on September 3. Combined with wearables and other products like the Galaxy Gear, Galaxy Camera and Galaxy Tab, the Korean manufacturer has been busy and consistently in front of consumers.

And yet Fitch Ratings, a major credit rating agency in the US, was much more bearish than bullish Tuesday on how they feel Samsung will cope in the competitive smartphone market over the next year. According to the Wall Street Journal, Fitch’s corporate rater Nitin Soni predicts that Samsung's worldwide smartphone market share may fall from 31% this year to 25% in 2015.

In the WSJ report, Mark Newman, an analyst for Bernstein Research, also said in a note that Samsung’s future in the smartphone market could be compromised if not for "a drastic change in smartphone strategy.” After slashing his price target on the company, Newman said investors should "react now before it's too late."

Are things really all that bad for Samsung, or is Wall Street simply overreacting (as they’ve been known to do) to current market data? As much as I’d love to disagree with anything The Street has to say or prognosticate, I think they’re on the right track.

In fact, I’d even take it one step further by arguing that it could even be worse for the S5, S6 or Note 4. Now don’t get me wrong; I’m not suggesting that the S6 or the Note 4 will be failures by anyone’s standards. It just seems clear that when 2014 comes to a close Apple will be one step ahead.

The reasons for Samsung’s potential future woes are numerous, but the most dominant ones boil down to brand loyalty and future vision. The two companies can toot their own horns as loud as they want in the media and in their product announcements, and Samsung could spend billions in ads knocking the iPhone, and it probably wouldn’t matter. Why? Because no matter how sweet the phone is or how cool the latest iteration of the operating system will be, Apple will always have its fanboys and fangirls.

Sure, there are Samsung loyalists out there but it’s much more difficult to find consumers whose gadget purchases are guided solely by their love for all things Samsung. Galaxy owners purchase the phone because they either love Android, hate Apple, or just prefer the Galaxy’s features. On the other hand, Apple benefits from the phenomenon showcased rather humorously in this recent Jimmy Kimmel bit.

Regarding future vision, Samsung’s proverbial goose may have been cooked the day Tim Cook announced iOS 8 and OS X Yosemite at the WWDC conference. With the huge advantage of having a computer operating system to tie to their mobile OS, Apple is taking the right steps in blurring the line between our lives at our desks and our world on the go. As iOS and OSX mature, the two will become more and more alike, and those using a Mac will find it much more difficult to ditch the Apple ecosystem. I know several Mac users who have a Galaxy phone, but I wouldn’t be surprised if that changes within the next year or so.

Oh, and we can’t forget the size factor. While iPhone users have been fooling themselves into thinking size doesn’t matter, we’ve got to admit we look at the Galaxy Notes with a bit of screen envy. That will change with the new 4.7 and 5.5 inch iPhones coming out, and although Apple is very late to the game, it’s going to take a chunk out of Galaxy’s sales (and sails for that matter).

I’m not trying to incite a flame war here. This is coming from a guy who has gone from iOS to Android and back twice, so I see the greatness on both sides.

Samsung’s not going anywhere, but their road - once paved with gold - is looking a little more silver these days.

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Mark Stone

Mark Stone

Before switching careers to writing, Mark spent many years in information technologywearing several hats, including five years as an Information Security Analyst with the provincial government in Manitoba. When Mark moved to Kelowna, he began writing columns about information security and realized he had a knack for writing. Mark wrote a fiction novel, which was published in 2008, and was also... more



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