Samsung’s Dip Gives Apple Reason to Laugh

Samsung Electronics Co. (005930) and Apple Inc. 

(AAPL:US) are trading places.
Last year, as sales of Samsung’s lineup of Galaxy smartphones and lower-end models surged around the world, Apple experienced its first profit decline in a decade and its iPhone -- which is priced more expensively than other handsets -- lost market share. Samsung gleefully rubbed Apple’s nose in it with television ads mocking iPhone users as pathetic fan boys.
Now the roles are reversed. Samsung yesterday posted stagnating sales and its weakest profits since becoming the world’s biggest phone maker in 2012, just a week after Apple released strong financial results driven by a jump in iPhone sales.
The reports expose a vulnerability in Samsung’s strategy of trying to be the phone company for all people. The high-end Galaxy S line -- the most profitable models for the company -- is being squeezed by Apple, which will attempt to tighten its grip later this year with bigger-screen iPhones that undercut a key selling point for Samsung. At the other end of the price spectrum, Samsung is grappling with upstart rivals in Asia such as Xiaomi Corp.
The squeeze is taking a toll on Samsung’s market share as well as its bottom line. While the Korean company still has the single-largest share in smartphones, its slice of the industry slipped to 25 percent as of the end of June, from 33 percent a year earlier, according to research firm Strategy Analytics.
“Samsung continues to face tough competition from Apple at the higher-end of the smartphone market and from Chinese brands like Huawei at the lower end,” Neil Mawston, executive director of Strategy Analytics, said in a statement.

Standing Pat

Apple, meanwhile, is seeing the fruits of sticking with its strategy of focusing on deeper-pocketed customers and not responding to critics who have urged the Cupertino, California-based company to cut prices. IPhone sales increased 13 percent last quarter and the company had its biggest profit jump in two years.

Investors have taken note. Samsung’s stock fell 3.7 percent after its results were released yesterday, and are down 2 percent this year. Apple is up almost 20 percent (AAPL:US) this year and is approaching a record.