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Friday, July 10, 2015

Samsung Galaxy is Flying off a cliff.

Back in March, I published an earlier post explaining why the Galaxy S6 would be a failure for Samsung.  Three months after the phone's release, it appears that I was right.  Phone sales are down. profits are down.  Some reports are saying Samsung target sales are off by 40%.  Samsung is desperate to push its acceptance and does not seem to understand why it is failing.

Don't get me wrong, the Galaxy S6 is not a bad phone.  It is not bug ridden or defective in any serious way.  But as I wrote in my earlier post, the S6 is essentially trying to be an iPhone clone.  Nothing terribly wrong with trying to be more like the best selling phone on the market.  But if your phone is more expensive than the iPhone, who is going to spend more for an iPhone clone when they can just buy an iPhone?

For many years, the Galaxy line surpassed iPhone because it offered features that the iPhone did not. The most prominent was that the Galaxy offered a much bigger screen.  Apple got the message on that. It came out with a much bigger screen for the iPhone 6 and an even bigger screen with the 6 plus.  As a result, iPhone sales have soared and Galaxy sales plummeted. And no, Samsung cannot respond with an even bigger screen.  At some point, screens get too big.  Both phones seem to be at right about the size most people want.

I recently attended a Samsung event for IT professionals designed to tell us why the Galaxy S6 was a great choice.  They even gave me a free S6 for attending.  That phone has sat on my desk it its box unused.  I have no desire to upgrade from my S5.  In doing so, I will lose my ability to swap out my battery (the S6 battery actually holds a smaller charge than the one that came with the S5).  I lose the ability to add memory using an external chip.  I would also have to upgrade my expensive Mophie Juice Pack cover.

To make the upgrade, what benefit do I get? The most celebrated new feature of the S6 seems to be the metal case over the S5 plastic case.  But I don't care about the case since I put my phone in an external protective case anyway.  I don't even see the Samsung case.  I'm also told the S6 screen has higher quality graphics.  But I haven't had a complaint about graphics on my last three phones.  4k graphics are great on a 100" TV, but no one cares about it on a 5" phone screen. Samsung is improving something that does not need improvement.

Samsung was also pushing special Samsung only features to encourage IT professionals to use Samsung in the enterprise environment.  Device management, encryption, and other security features are all well and good, but I cannot force everyone in my company to use a Galaxy.  There would be a revolt.  We have hard core iPhone users.  We have BYOD policies for people who do not have company provided devices.  Going to an all Galaxy environment is not an option.  That is the kind of thing that Blackberry demanded and it is why it failed.  Security and device management has to be cross platform.  Samsung is just wasting time and money with this.  Unless they plan in the future to offer a way of adding non-Samsung devices to the system almost no one will use these features, ever.

With its "big screen" advantage over the iPhone gone, Samsung needs to find a new must-have benefit.  Some people seem to like the unique benefits of the curved screen Samsung Edge, although I don't really see the appeal.  Finding that unique killer app is admittedly very difficult.  Because Samsung does not control its OS, there are dozens of other phone manufacturers who can copy pretty much anything that Samsung develops.

Absent some new "must have" feature, consumer preference will likely focus on price and performance.  Companies that find a way to reduce price and maintain top performing features will win this competition.  Prices for most premium smart phones are hidden in the monthly fees charged by the cell phone companies.  If I bought an S6 with a two year contract, I would pay only $200, but would be obligated to pay $50-60 per month for two years.  Without a contract, the full retail price of the phone is a whopping $700.  Compare that to my 7" Asus MemoPad tablet which also runs Android and can do all the same basic things but costs only about $80. You cannot tell me that adding 4G and phone capability adds $620 to the cost of a device.

As phone companies move closer to ending the subsidization of phones through monthly charges, phone makers will only feel more price pressure.  People will always pay a premium for the unique iPhone, but not so much for the Samsung Galaxy.  Samsung needs to begin thinking about a lower cost phone.  Making a high priced iPhone clone simply is not sustainable as it is not attractive to consumers.  Samsung cannot beat the iPhone on its own terms.  Samsung must consider changing the terms of the competition before it loses its reputation as an industry leader.

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