By Microsoft Corporation (NASDAQ:MSFT) partnering with Nokia, the company has already been able to secure 18% of the global market. It is just a matter of whether or not Nokia and Microsoft can keep that market share. If it can, then Nokia Corporation (ADR) (NYSE:NOK) can stem its decline in earnings,and Microsoft will be earning a lot of revenue from its mobile licenses.
Never forget Google
Google Inc (NASDAQ:GOOG) has been able to dominate the globe by partnering with globally capable distributors like Samsung, LG, and HTC. While I don’t think the individual handset makers are a very good investment opportunity, I think that Google itself will generate a significant amount of earnings growth going forward. IMS Research projects that the demand for internet capable devices will triple by 2020. I am skeptical of Google keeping its nearly 70% market share going forward, but I believe that the number of devices using Android will grow at a faster rate than Google Inc (NASDAQ:GOOG)’s loss of market share.
Because it’s just an intermediary, the company’s operating margins will not be affected by this as much as the handset makers like Samsung and LG. This is because Google generates transaction fees through its Google Play marketplace and also earns revenue from advertising, so anything above break-even is pure profit. The negative of losing market share is a loss of earnings growth momentum, but it will not result in a loss of earnings in and of itself.
I believe that Google will lose out a bit to some of its rivals like Microsoft Corporation (NASDAQ:MSFT) and Apple. Microsoft is worrisome because of its success in consumer electronics (the Xbox 360 reached a 47% market share in the United States, for example), and Apple’s lack of market presence globally has to do with limitations in how the company can sell its products in markets that are saturated by lower-margin phones. Apple Inc. (NASDAQ:AAPL) plans to take away the competitive advantages of Samsung, Sony, and HTC in the emerging markets by marketing lower-end devices.
Conclusion
Investors should stick with Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), and Google Inc (NASDAQ:GOOG). I also believe that Nokia could have some potential here if its partnership with Microsoft is able to stem the losses in its global shipments and at least stabilize its market share. Avoid investing in Samsung, as its rapid increases in advertising are just a scare tactic.
The article Samsung Will Be Crushed by Apple and Microsoft originally appeared on Fool.com and is written by Alexander Cho.
Alexander Cho has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. 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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