The situation
Google Inc (NASDAQ:GOOG) is planning on spending as much as $500 million to help its Motorola subsidiary make a successful phone. Motorola currently holds approximately 1% of the market share, and is developing a new phone coined “Moto X.” If half a billion dollars doesn’t motivate Motorola, what will? The issue isn’t expanding Android, it already owns the majority of global market share. The issue is whether Google Inc (NASDAQ:GOOG) can avoid being cut out of the Android ecosystem.
If Samsung follows what Amazon did with its Kindle Fire on the smart phone front, would Google hold any relevance? Samsung is dominating the Android market place by capturing 95% of its profits. In the first quarter, Samsung sold 82.2 million phones, tablets, and laptops. Samsung is the dominant force behind Android at the moment, but could be the only force given some time.
What happens?
Well, a lot. Probably the most obvious result would be Google Inc (NASDAQ:GOOG) losing out on Google Play media and apps revenue. However, the biggest would probably come by Google Inc (NASDAQ:GOOG) losing the relationships its built with mobile users.
This would give Apple Inc. (NASDAQ:AAPL) a chance to further their market share with the highly anticipated cheap iPhone model (presumably the iPhone 5S). We shouldn’t have to wait too long before seeing how both companies respond. Most of this would be dependent upon Motorola’s MotoX device, and how users respond to it.
The debate will continue, but a lot of users have a different attitude. They claim Samsung’s Galaxy SIII and Galaxy SIV are the best phones they have ever had. The reason? Everything on it is from Google Inc (NASDAQ:GOOG). The Google Apps and hardware are why many people buy Samsung’s devices. Surely, this won’t cause both companies to abandon each other.
Revenues
Everyone seems to be discussing how much revenue these companies are deriving from phones.
Apple Inc. (NASDAQ:AAPL) clearly wins the competition, as it generated nearly $83 billion off of the iPhone in 2012. If it can release a cheaper model of the iPhone this year, its markets will expand and solve what is believed to be one of the companies greatest weakness. A lot of expectations have been set for Apple Inc. (NASDAQ:AAPL), but not even they know if they can meet them.
If things go horribly wrong for Google and they lose out on the same opportunity they created, they would lose nearly 12.5% of their annual revenues. In other words, there is approximately $6.2 billion at stake here – not to mention the $500 million given to support Motorola. Just think, Apple is building a new headquarters for almost that much.
Samsung actually out-generated Apple Inc. (NASDAQ:AAPL) in 2012, bringing in approximately $85 billion from smart phones. That’s impressive. There is no telling how much that would increase if they booted Google Inc (NASDAQ:GOOG) from the picture, but if they simply acquired half of the 1% market share that Motorola owns, it would be a huge impact. The industry generated $1.2 trillion in 2011 — meaning Samsung would generate an additional $6 billion.
Surely Apple is loving the show as the companies fight over Android. The competition won’t go away, but they will have a few more headaches to cure.
The bottom line
It will be fun to watch unravel. Google is placing a big bet on Motorola, but no one knows if it will pay off. If it does, good for them, they likely change the mobile landscape once again. If they don’t, they lose big. Samsung has nothing to lose at this point in regards to smart phones, and Apple Inc. (NASDAQ:AAPL) is enjoying the showdown. I would never bet against Google Inc (NASDAQ:GOOG), but their future with smart phones looks gloomy. Buckle up, and hold on.
The article Samsung and Google Provide Entertainment For Apple originally appeared on Fool.com and is written by Tyler Wofford.
Tyler Wofford has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Tyler 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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