Samsung mulls software M&As

Rethink If the Google-Motorola deal confirms one conclusion about the modern mobile industry, it is that power has convincingly shifted from hardware to software. Rivals who are sanguine about Motorola’s still impressive product engineering skills are scared that the firm will gain early access to new Android features via its future parent.
Increasingly, the main way to differentiate an Android device is via a strong user interface like the HTC Sense, or distinctive app store – and Apple has clearly shown how an integrated hardware/software experience and a compelling user interface can make up for all kinds of mediocre hardware specs.
In this environment, the traditional, spec sheet-focused handset makers have been vulnerable. Nokia’s much maligned former CEO, Olli-Pekka Kallasvuo, saw that clearly and before most of his rivals, but the strategy he outlined to turn the Finnish giant into a web and software firm was over-ambitious and often poorly executed. Hence Nokia’s conversion into a chattel of the biggest software player of them all, Microsoft. HTC has been moving rapidly to accumulate software and media assets, but the biggest cultural change is that being kicked off at Samsung.
The Korean vendors have been the ultimate in prioritizing hardware innovations over user experience, but in the past few years Samsung has been hiring huge teams of developers and building up its software expertise. Now, the company’s chairman, Lee Kun-hee, has called on senior executives to explore options for expanding the firm’s own software platform, including possible acquisitions of its own.
[I]nsiders [told] the Korea Herald [that] Lee called a meeting on Wednesday with top managers and told them that Samsung needed to enhance its software competitiveness to match the hardware advantages the company enjoys. The firm has been going down this road for a couple of years, creating its homegrown operating system, Bada, for midrange smart-phones; making the TouchWiz user interface increasingly strategic; and creating various app and content stores.
Lee reportedly told the meeting: "We must pay attention to the fact that IT power is moving away from hardware companies such as Samsung to software companies." It seems that Lee is looking to protect his firm against possible negative effects of the Motorola deal even though, in official statements, Samsung has said the acquisition would strengthen the whole Android base (and it may hope that Google will make such a mess of running Motorola that one competitor will effectively be neutralized).
"Chairman Lee told top managers to come up with various measures including M&As to enhance software competitiveness," Kim Soon-taek, head of the Samsung Group office, told reporters.
The TouchWiz interface, like HTC’s Sense, has become increasingly important in defining the Samsung brand, especially as it spans different operating systems. This is important for standing out from the Android crowd and, in light of recent lawsuits, for countering Apple charges of “slavish” copying of the iPhone/iPad.
Recently, Samsung unveiled a software update for the new Galaxy Tab 10.1, which changes the look and feel and adds new features to the vanilla Android Honeycomb OS. Some of these features, such as Wi-Fi printing and secure remote network access, are clearly aimed at enterprises, where the iPad has been seeing growth, sometimes at the expense of notebooks and netbooks. Samsung also said its upgraded user interface would be simpler and more visually appealing.
It calls the new UI “TouchWiz UX,” an extension of its smartphone TouchWiz widgets-based technology…optimized for larger screens. Among its features are more advanced multi-tasking and customization than in the original TouchWiz, and a media hub containing movies, TV content and preloaded apps such as Amazon Kindle and Cloud Player.
Giving Amazon such a prominent place may be a hit at Apple, which recently barred Kindle users from buying books from within the iPad/iPhone app. It may also be a defense against Amazon’s expected launch of its own cloud-oriented Android tablet this fall.
The changes aim to narrow the market gap with the iPad. They will also look to differentiate Galaxy from other Android tablets like HTC Flyer and Motorola Xoom. As HTC Sense has demonstrated, a recognizable and friendly user interface, overlaid on Android, can get round the disadvantages of having the same OS as everyone else.
Galaxy Tab 10.1 owners will receive the over-the-air download but there will not be the option of reverting to the more standard Android interface – another lesson from Apple -, as Android vendors try to assert greater control over their brands in the anarchic open source world.
“We've done a lot of research on what consumers are looking to improve,” said Samsung. ”It follows along those three general categories, with ease of use and visual appeal, much more fun and entertaining and enterprise enablement. It's not intended to be intrusive but is intended to be helpful."
For now, Samsung’s mobile strengths are in hardware and it has significant resources to throw against a strengthened Motorola. Unlike most OEMs apart from Apple, Samsung has the cost and control advantages of controlling some of the key components of its products, increasingly going in-house for its touch screens, memory and processors.
The quality of the touchscreen is a key differentiator for smartphones and tablets, and Samsung plans to move the goalposts once more. The Korean firm has an iron grip on the cutting edge of mobile displays with its Super AMOLED Plus technology, and now it aims to shrink full-sized HD screens to fit mobile gadgets.
The resulting Super AMOLED HD is expected to arrive in tablets and large handsets by the end of this year, targeting screens of over five-inches. At 1280 x 720 pixels, it will convincingly trump the 960 x 640 resolution of Apple’s RetinaDisplay. As with other Super AMOLED breakthroughs, it will be an exclusive for Samsung's cellphone unit, rather than being offered to its third party customers, indicating the rising importance of controlling the mobile supply chain.
According to Ron Mertens of OLED Info, who spoke to Samsung suppliers: “We can expect five-inch to six-inch smartphones in fall 2011 (the first will probably be the GT-I9220 with a 5.3-inch display) and seven-inch tablets by the end of 2011.”
Merten's sources suggest that the Super AMOLED price premium is now around 20% over Super LCD at the same size.
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