The business environment
Samsung’s stock has declined by 11.4% since the beginning of June. I believe the company is facing fundamental problems in the high-end smartphone space. Apple Inc. (NASDAQ:AAPL) makes the lion’s share of total global profit in smart phones, making it the superior company.
Apple earned 57% of global profit share in the smartphone market while holding 18% market share. Comparatively Samsung had 30.8% market share and earned $2 billion less than Apple Inc. (NASDAQ:AAPL) in the first quarter.
Samsung was able to make gains in market share through lower-priced phones in emerging market economies like China and India. Apple will be selling different phone versions by the end of 2013 in order to generate greater market share and to decrease the competitiveness of Samsung in low-income markets. I believe that Apple Inc. (NASDAQ:AAPL) will keep its comparative advantage in profitability and increase its market share by 2014.
Windows 8 the next big thing
Microsoft Corporation (NASDAQ:MSFT) will continue to grow due to Windows 8 purchases. Currently Nokia Corporation (ADR) (NYSE:NOK) has 14% of global market share in the phone space, and going forward almost every Nokia will be shipped using a Windows 8 mobile operating system. The third alternative in the mobile space will be the Windows Phone because Microsoft’s operating system is very familiar to the average user and has a lot of spunk; Windows 8 software runs buttery smooth, unlike Google Inc (NASDAQ:GOOG) Android.
The greatest advantage of Nokia Corporation (ADR) (NYSE:NOK) partnering with Microsoft Corporation (NASDAQ:MSFT) is that it gives Nokia Corporation (ADR) (NYSE:NOK) access to Microsoft’s expansive ecosystem of applications. Plus I don’t anticipate Office 365 to go over to Android anytime soon.
I believe that Microsoft Corporation (NASDAQ:MSFT) could generate an additional $10 billion a year from Office 365, just by launching it on both Windows 8 and Mac/IOS. Going forward students and employees will either buy an Apple or Windows device just because of Office 365.
The cross-compatibility of work, play, and user experiences definitely favor Apple Inc. (NASDAQ:AAPL) and Microsoft. This more or less throws Samsung, LG, and Motorola under the bus.
Conclusion
I believe that Samsung could have difficulty in the near future. While it has compelling products, its ecosystem (Android) isn’t nearly as strong as Microsoft Corporation (NASDAQ:MSFT)’s or Apple’s. This could be the beginning of the end for Samsung’s reigning dominance in global market share.
Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT).
The article Samsung Is a Sell, Sell, Sell originally appeared on Fool.com.
Alexander is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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