Can money buy
) some smartphone love?
And why is
(OTCMKTS:SSNLF) trying to game benchmark tests?
These, my friends, are the questions that tech investors should be
asking themselves this week while waiting for Twitter's highly
anticipated IPO filing to drop.
So let's get down and explore the dark side of smartphone growth
Microsoft's Mobile Pickle
As it stands now, Microsoft has a very weak position in the mobile
device market that is completely upending the traditional PC
In the second quarter of this year, smartphones running Microsoft's
Windows Phone operating system held just 3.3% of the market share,
according to Gartner. In tablets, Gartner tells us that Microsoft's
Windows platform held 4.5% of the market.
While Microsoft has been making gains in both areas (off very small
bases), the competitive situation is only getting worse.
The never-ending stream of new
) Android devices is still flowing, while
) is likely to soon announce a new iPad Mini. And of course, its
new iPhone 5S is sucking up mass quantities of media attention
while flying off the shelf.
Additionally, while I believe that Microsoft's Surface Pro 2 tablet
is in some ways an ideal device, it also has issues. Starting at
$899, it is far too expensive -- and meanwhile, Microsoft is
unnecessarily creating confusion in the market place with the
Surface 2 tablet.
The Surface Pro 2 and Surface 2 have very similar names, but they
each run different operating systems with their own app
ecosystems... and in any case, the Surface 2's predecessor sold so
poorly that it resulted in a $900 million writedown for Microsoft.
The Solution? Cold Hard Cash
In September, Microsoft began offering gift cards of $200 or more
for used iPads to get users to convert to the Surface.
And just this week, it expanded the program to include iPhone
Now this is a just plain odd situation, given how common it is for
Apple enthusiasts to despise all things Microsoft.
Maybe there are fence-sitters considering dropping out of the Apple
ecosystem... but how many could be left?
The iPhone 5S is unequivocally the best smartphone on the market,
and in any case, Android has probably already pulled out a lot of
users that just weren't that into Apple.
The logical conclusion is that Microsoft is simply desperate to
build market share
Samsung's Benchmark Games
ArsTechnica is one of the technology industry's leading publishers
of smartphone performance benchmarks, and it found something funny
when it reviewed the new Samsung Galaxy Note 3: I
t was rigged
to give great scores on benchmark tests.
The Galaxy Note 3 runs on a
) Snapdragon 800 processor, but blew the doors off the LG G2, which
uses the same chip.
Well, when the Galaxy Note 3 detected that it was running a
benchmark test, it kicked the processor into overdrive. ArsTechnica
reports that while Samsung did this with the international version
of the Galaxy S4, it's the first time the publisher had seen it
happen on a US device.
ArsTechnica also noted the following:
The ironic thing is that even
the benchmark booster disabled, the Note 3 still comes out faster
than the G2 in this test. If the intent behind the boosting was
simply to ensure that the Galaxy Note 3 came out ahead in the
benchmark race, it doesn't appear to have been necessary in the
It's simple. Differentiation is becoming very difficult in the
Android market, courtesy of how rapidly hot new models keep coming
on the market.
Let me circle back to early August, when I discussed the challenges
leading Android phone makers
(TPE:2498), and Motorola:
Every company has access to the same mobile phone components --
or at least equivalent ones -- from companies like Qualcomm,
So where can an Android smartphone maker get an edge?
Customized software? Nah, the customers that notice it usually hate
Manufacturing? Nope, contract manufacturers are open to everyone.
Supply chain? Sorry,
(DELL) taught the world the magic of just-in-time inventory a long
Samsung is still the clear leader in terms of smartphone volumes,
with number-one market share and 57% unit growth in Q2, but it has
acknowledged that competitive pressures -- the same ones that took
down HTC -- are heating up. The Samsung-Apple duopoly is most
certainly coming under pressure form the fast-growing
(SHE:000063) triumvirate, at least in international markets.
Isn't There a Better Way?
Samsung is perhaps fighting the specs war because it may be the
It certainly can't out-design Apple in hardware or software, and
even with Android, I'd argue that Samsung doesn't have anything as
visually appealing as the HTC One.
It can't really go down in price without hurting the brand and
So it's going for the specs war route, which seems bad for one
reason: It is at risk of training customers to focus on numbers.
Why Is This Bad?
Simple -- because those same numbers are accessible to everyone.
As I noted above, all the manufacturers have access to the same
hardware and software, and they're all constantly cranking out new
models. So how does one maintain a sustainable edge in terms of
And even this benchmark gaming nonsense can only go so far, since
the competition is doing it as well!
A subsequent AnandTech study
found that every phone OEM (original equipment manufacturer)
besides Apple and Motorola is trying to overstate performance
I'm sure the hope on Samsung's end is that people will associate
Samsung with high performance, but how many people really notice
extra processing power in real-world use?
Samsung is indeed the king of the hill in smartphones. But as a
high-profile publicly-traded company, it still has to grow -- and
in a hypercompetitive market, that's simply not easy.
What Does This Say About the Smartphone Market?
The smartphone and tablet markets are simply terrifyingly
competitive, judging by its low profitability (ex-Apple) even in
the face of extraordinary growth.
As time goes on, and as the market inevitably slows, the tactics
will only get more fierce -- and in some cases, more pathetic.
Stay tuned. This story is not over.
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