Does Samsung want to make Android irrelevant?

Phil Goldstein

NEW YORK--I want to preface this by saying that I think Samsung Electronics' Galaxy S4 is an incredibly well-designed smartphone with a handful of innovative features that will help it stand out in the market. Given that, along with Samsung's marketing budget and the massive array of operators it has lined up to sell the GS4, I have no doubt Samsung has a mega-hit on its hands, and will likely sell tens of millions of GS4 units.

What's more interesting to me is what the GS4 says about Samsung and its relationship to Google (NASDAQ:GOOG), whose Android platform Samsung has used to build itself into the world's largest smartphone maker. The plethora of Samsung or Galaxy-branded software features, content offerings and services Samsung unleashed Thursday night has me convinced that Samsung wants consumers to place much more value in its brand than Google or Android.  

To a certain extent, every handset company running Android tries to do this. They want consumers to be loyal to their brand, not the company providing the software. Yet because of Samsung's size, its dominance of the Android platform and the sheer number of services it is touting, the dynamic is at once more complex and troubling for Google.

Look at the range of Samsung services the company either rolled out or expanded on its GS4 announcement: using a "Samsung account" for Samsung Hub to get movies, music, games and books (which has been around longer than Google's Play store); Samsung WatchON for video discovery and sharing with TVs; S-Translate for text- to-speech and speech-to-text translation; Samsung Apps specialized for Samsung services; Group Play, which lets users share photos, music, documents and games with other Samsung devices; and so on. Many of these services, notably Hub and S-Translate, compete directly with ones Google offers.

Many analysts I spoke with after the GS4 announcement said that Samsung's effort to highlight these services and software features was a clear indication that the company has ambitions to leverage its assets in consumer electronics and mobile to be an ecosystem player of the first order. I don't know if I would go that far, but I do think Samsung has signaled that it has the capabilities to be more than just a vessel for Google to build its mobile advertising business. Samsung wants to create the perception that Android is an afterthought--almost invisible, below the surface--even if in reality it continues to rely on Android to power its mobile business.

Gartner analyst Michael Gartenberg said Samsung wants to leverage its phone business to sell tablets, and tablets to sell TVs. "It is increasingly leaning toward a Samsung-focused universe," he said. "I think that in itself is a big change."

Yet even if that's the case, analysts seemed to agree that Samsung does not want to rock the boat too much. "This [using Android] has been a ridiculously profitable enterprise for Samsung," said Current Analysis analyst Avi Greengart. "There is no reason that Samsung would want to fork Android or put all its efforts behind Tizen or Windows Phone or anything else."

Indeed, Samsung has made billions during the last few years by using Android, even if it has dabbled with Windows Phone, its own (now-defunct) bada platform and now Tizen. Having multiple OS options has always been Samsung's style. So if it doesn't want to create its own platform, what does it want to do?

"What they want is that the consumer sees this as a Samsung product, not an Android phone," said Recon Analytics analyst Roger Entner. "They are going to downplay all the things that Google does and are going to play up all the things that they do. Android means commoditization. Commoditization is the enemy of differentiation."

Reticle Research analyst Ross Rubin noted that there is always inherent tension when a software licensee starts shipping massive volumes of devices, as Samsung has done on Android. Yet he does not think the Google/Samsung relationship is like the acrimonious Microsoft/Hewlett-Packard battle of the PC era. "It's implicit that it would be much more difficult for [Samsung] to create these kinds of differentiations on another operating system," he said.

So what is this all about? Google bought Motorola Mobility for $12.5 billion and has pledged to remake it into a top-flight, innovative Android device maker. Samsung may have seen that as a direct threat, so it is using its services to differentiate its brand, and also perhaps hedge against Google becoming more vertically integrated. Samsung may also be building its own brand as a negotiating tactic with Google to get more revenue from Android, Greengart said.  

In the end, the GS4 will likely be very successful, and both Google and Samsung have incentives to keep their relationship on track, even if Google is worried about Samsung's dominant Android position. "It would seem to me that both Google and Samsung have more to gain through closer collaboration on the development and introduction of new services than they do with Samsung occupying the dominant flagship role it does while it quietly charts a more independent strategy," said IDC analyst John Jackson.

I don't think Samsung wants to make Android irrelevant. Samsung just wants to make its brand the most important thing in consumers' minds. And the Galaxy S4 is its best vehicle yet to do that.--Phil

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