Smartphone Cos Stories.
Samsung success story: More about marketing than innovation?
Reuters, April 05, 2013
Samsung Electronics is spending more on marketing than R&D for the first time in at least three
years, prompting some pundits to warn that the IT giant is sacrificing innovation at a time when
the market is teeming with ever smarter gadgets.
The South Korean firm, which warned on Friday it will not post record quarterly earnings for the
first time since 2011, looks set to spend big bucks on marketing upcoming mobile devices,
including the Galaxy S4 smartphone, to convert more iPhone and iPad users loyal to arch rival
While the new Galaxy smartphone, unveiled to much fanfare in New York last month, will boast
a motion-detecting technology that stops and starts videos depending on whether someone is
looking at the screen, and flip between songs and photos at the wave of a hand, industry watchers
say the device would not overturn an industry that lives and dies by innovation.
"(Samsung) lagged behind in creating a new category. Apple created a new category with tablets.
We are waiting to see something like that happen from Samsung," said Rachel Lashford, an
analyst at research firm Canalys in Singapore.
Samsung spent a record 13 trillion won on marketing last year. That was $1.3 billion more than
what it poured into research and development.
The firm does not provide marketing and R&D spending forecasts. Some analysts said they
expect Samsung to continue spending more on its marketing campaigns than on R&D this year
as it fights the next wave of products from Apple.
Smartphone makers are increasingly just tweaking existing specifications such as increasing
screen sizes. Every gadget launch by a major global tech giant has so far underwhelmed, lacking
the 'wow' factor of old and subsequently pushing their share prices lower, some analysts said.
Apple has tumbled nearly 40 percent since the stock soared to more than $700 in September.
Shares of Samsung hit a record in early January but have since fallen nearly 3 percent. A lack of
product lineup in the longer term is also capping their upside, analysts said.
"There is not that much visibility on products next year, but we expect Galaxy Note 3 later this
year," said Mark Newman, a senior analyst at Stanford Bernstein in Hong Kong, referring to the
phablet that is closer in size to a tablet than a phone.
The smartphone-tablet hybrid, a surprise hit in 2012, appeals to users who prefer larger screens
to better access visual content.
Samsung estimated its January-March overall operating profit rose 53 percent to $7.7 billion as
mid-tier smartphones and sales in emerging markets helped it tide over the off-peak season.
That marks the end of five straight quarters of record profits for the world's biggest technology
firm by revenue.
"We'll keep boosting our R&D spending, while marketing will be executed flexibly according to
market conditions," a Samsung spokesman said on Friday.
Ahead of Apple
Apple ramped up its R&D expenditure to $3.38 billion in the year to September 2012, from just
$712 million in 2006. Yet that is still far less than what Samsung spends.
"Samsung keeps investing in R&D. They've boosted their smartphone R&D workforce to 25,000
or so from less than 20,000, and I think they have an exciting product lineup ready, probably in
the second half, to upend the market," said Lee Do-hoon, an analyst at RBS.
I’m in a black Mercedes-Benz (DAI:GR) van with three Samsung Electronics PR people heading
toward Yongin, a city about 45 minutes south of Seoul. Yongin is South Korea’s Orlando: a
nondescript, fast-growing city known for its tourist attractions, especially Everland Resort, the
country’s largest theme park. But the van isn’t going to Everland. We’re headed to a far more
profitable theme park: the Samsung Human Resources Development Center, where the theme
just happens to be Samsung.
The complex’s formal name is Changjo Kwan, which translates as Creativity Institute. It’s a
massive structure with a traditional Korean roof, set in parklike surroundings. In a breezeway, a
map carved in stone tiles divides the earth into two categories: countries where Samsung
conducts business, indicated by blue lights; and countries where Samsung will conduct business,
indicated by red. The map is mostly blue. In the lobby, an engraving in Korean and English
proclaims: “We will devote our human resources and technology to create superior products and
services, thereby contributing to a better global society.” Another sign says in English: “Go! Go!
Photograph by Tony Law for Bloomberg BusinessweekSamsung’s Human Resources
More than 50,000 employees pass through Changjo Kwan and its sister facilities in a given year.
In sessions that last anywhere from a few days to several months, they are inculcated in all things
Samsung: They learn about the three P’s (products, process, and people); they learn about
“global management” so that Samsung can expand into new markets; some employees go
through the exercise of making kimchi together, to learn about teamwork and Korean culture.
The success story of Apple’s App Store: five years and 900,000 apps
June 13, 2013 by Dr. Nikola Bachfischer
Five years, 900,000 apps and 50 billion downloads. Impressive benchmark data which Apple
boss Cook quoted in his keynote speech for the iOS App Store at the annual developer
conference WWDC. Commercially the App Store with 10 billion US$, which was paid by Apple
to around six million registered developers, is also a great success. In 2012 it was just 5 billion
US$ which clearly shows how fast the market is developing. Apple keeps 30% of the earnings
from the App Store with 70% going to the developers.
After Apple had opted for a very emotional approach in its most recent TV commercial, the
company decided to follow this up with an unusually long and emotional video for its App Store.
The positive effects of particular applications like Skyscape Medical Resources, Galileo,
Cherokee Language or Proloquo2Go on the lives of its users were highlighted instead of simply
advertising products and their various uses as is usual. They show that apps are not always
concerned with shopping lists, vouchers or making life a little more comfortable for the average
user. As remarkable as the video is however, parts of it are non-specific and rather too general:
would anyone notice if the name Apple was replaced by Google?
A very emotional Apple video: Making a Difference. One App at a Time
Apple’s App Store vs. Google’s Play Store
It is interesting to compare it with Google’s Play Store which overtook Apple in January with the
number of apps and currently has 975,000 on offer. With this increasing market dominance,
Google is putting Apple under more pressure than it would like. However, Google still lags far
behind Apple as far as money earned is concerned. According to a current report by the analysts
from Distimo, Apples App Store is still the store from which developers make the most turnover.
According to Distimo, the 200 most successful apps in the App Store made around 5 million
US$ per day in April while the 200 most successful Google Play apps only made around 1
million US$. However, Google is catching up with amount of turnover made by Apple with
growth of eight per cent since November 2012.
Conclusion: Mobile apps represent one of the most dynamic and successful distribution models
of current times. It is clear that users integrate apps into their daily lives and no longer wish to do
without them. Despite its five year success story, Apple is no longer the undisputed leader at the
top. Google is continuing to put the market leader under more and more pressure. The battle for
market shares in this billion dollar market is hotting up. With its rather unusual video, Apple is
celebrating not just its success until now but also laying down its future claim to leadership.
Where Nokia Went Wrong
Posted by James Surowiecki
Nokia’s agreement on Tuesday to sell its handset business to Microsoft for $7.2 billion is
something of a minor business coup for Nokia, since a year from now that business might well
turn out to have been worth nothing. It also demonstrates just how far and fast Nokia has fallen
in recent years. Not that long ago, it was the world’s dominant and pace-setting mobile-phone
maker. Today, it has just three per cent of the global smartphone market, and its market cap is a
fifth of what it was in 2007—even after rising more than thirty per cent on Tuesday.
What happened to Nokia is no secret: Apple and Android crushed it. But the reasons for that
failure are a bit more mysterious. Historically, after all, Nokia had been a surprisingly adaptive
company, moving in and out of many different businesses—paper, electricity, rubber galoshes.
Recently, it successfully reinvented itself again. For years, the company had been a
conglomerate, with a number of disparate businesses operating under the Nokia umbrella; in the
early nineteen-nineties, anticipating the rise of cell phones, executives got rid of everything but
the telecom business. Even more strikingly, Nokia was hardly a technological laggard—on the
contrary, it came up with its first smartphone back in 1996, and built a prototype of a touch-
screen, Internet-enabled phone at the end of the nineties. It also spent enormous amounts of
money on research and development. What it was unable to do, though, was translate all that R.
& D. spending into products that people actually wanted to buy.
One way to explain this is to point out that Nokia was an engineering company that needed more
marketing savvy. But this isn’t quite right; in the early aughts, Nokia was acclaimed for its
marketing, and was seen as the company that had best figured out how to turn mobile phones
into fashion accessories. It’s more accurate to say that Nokia was, at its heart, a hardware
company rather than a software company—that is, its engineers were expert at building physical
devices, but not the programs that make those devices work. In the end, the company profoundly
underestimated the importance of software, including the apps that run on smartphones, to the
experience of using a phone. Nokia’s development process was long dominated by hardware
engineers; software experts were marginalized. (Executives at Apple, in stark contrast, saw
hardware and software as equally important parts of a whole; they encouraged employees to
work in multidisciplinary teams to design products.)
It wasn’t just that Nokia failed to recognize the increasing importance of software, though. It also
underestimated how important the transition to smartphones would be. And this was, in
retrospect, a classic case of a company being enthralled (and, in a way, imprisoned) by its past
success. Nokia was, after all, earning more than fifty per cent of all the profits in the mobile-
phone industry in 2007, and most of those profits were not coming from smartphones. Diverting
a lot of resources into a high-end, low-volume business (which is what the touch-screen
smartphone business was in 2007) would have looked risky. In that sense, Nokia’s failure
resulted at least in part from an institutional reluctance to transition into a new era.
And there was another mistake. Nokia overestimated the strength of its brand, and believed that
even if it was late to the smartphone game it would be able to catch up quickly. Long after the
iPhone’s release, in fact, Nokia continued to insist that its superior hardware designs would win
over users. Even today, there are people who claim that if Nokia had stuck with its own
operating systems, instead of embracing the Windows Phone in 2011, it could have succeeded.
But even though the Windows Phone has been a flop, the truth is that, by 2010, Nokia had
already introduced too many disappointing phones, and its operating system had already proven
too buggy, clunky, and unintuitive to win consumers over. In 2008, Nokia was said to have one
of the most valuable brands in the world. But it failed to recognize that brands today aren’t as
resilient as they once were. The high-tech era has taught people to expect constant innovation;
when companies fall behind, consumers are quick to punish them. Late and inadequate: for
Nokia, it was a deadly combination.
Photograph: Angel Franco/The New York Times/Redux
Technology & Media
The Fatal Mistake That Doomed BlackBerry
BlackBerry failed to anticipate that consumers — not business customers — would drive the
By Sam Gustin @samgustinSept. 24, 201324 Comments
• Read Later
Mark Blinch / REUTERS
A BlackBerry logo is seen at the BlackBerry campus in Waterloo, Canada, on Sept. 23, 2013
Beleaguered gadgetmaker BlackBerry said on Monday that it’s signed a tentative agreement to
be purchased by a group led by Canadian holding company Fairfax Financial in a $4.7 billion
deal. The transaction, in which BlackBerry would become a private company, represents a
turning point for a once high-flying tech giant that played a key role in the mobile-device
revolution only to be eclipsed by Apple and Google.
Fairfax, which already owns 10% of BlackBerry, will pay $9 per share for the company, about
3% more than its closing price on Friday. BlackBerry still has the flexibility to accept a better
offer in a maneuver known as a “go-shop” process, but it’s hard to imagine that a sweeter
overture will be forthcoming.
On Friday, BlackBerry announced that it would cut 4,500 jobs as it prepares to absorb nearly $1
billion in losses related to unsold-device inventory, sending its stock price plunging by
20%. Since last month, BlackBerry’s “special committee” has been evaluating strategic
alternatives (like a sale) for the company. BlackBerry and Fairfax are expected to complete their
due diligence by Nov. 4. By going private, BlackBerry (until recently known as Research in
Motion) can continue to attempt a turnaround without the Wall Street pressure that accompanies
(MORE: Why Apple vs. Google Is the Most Important Battle in Tech)
“The special committee is seeking the best available outcome for the company’s constituents,
including for shareholders,” Barbara Stymiest, chair of BlackBerry’s board of directors, said in a
statement. “Importantly, the go-shop process provides an opportunity to determine if there are
alternatives superior to the present proposal from the Fairfax consortium.”
Prem Watsa, chairman and CEO of Fairfax, is often referred to as Canada’s Warren Buffett, the
famed investor who runs the Omaha-based Berkshire Hathaway conglomerate. “We believe this
transaction will open an exciting new private chapter for BlackBerry, its customers, carriers and
employees,” Watsa said in a statement. “We can deliver immediate value to shareholders, while
we continue the execution of a long-term strategy in a private company with a focus on
delivering superior and secure enterprise solutions to BlackBerry customers around the world.”
It may seem like a distant memory now, but just a few years ago BlackBerry was the premier
mobile gadget on the market. The device was so ubiquitous on Wall Street and Capitol Hill that
it earned the nickname CrackBerry. As recently as 2009, BlackBerry was named by Fortune
magazine as the fastest growing company in the world, with earnings exploding by 84% a
year. Times have changed. Since 2009, BlackBerry’s stock price has collapsed by a vertigo-
inducing 90% to under $7 at its low point last summer.
Today, BlackBerry has fallen to the back of the smartphone pack — with a minuscule 3% of the
market — as Apple’s iPhone and Google’s Android operating system have come to dominate the
market. BlackBerry’s decline has become a case study about what happens when a tech giant
fails to innovate in a consumer-technology market evolving at breakneck speed. In a sign of the
times, Apple said on Monday it sold a record 9 million units of its latest iPhone devices during
the first weekend they were on sale.
(MORE: BlackBerry CEO Could Face Testy Crowd at Annual Meeting)
BlackBerry’s failure to keep up with Apple and Google was a consequence of errors in its
strategy and vision. First, after growing to dominate the corporate market, BlackBerry failed to
anticipate that consumers — not business customers — would drive the smartphone revolution.
Second, BlackBerry was blindsided by the emergence of the “app economy,” which drove
massive adoption of iPhone and Android-based devices. Third, BlackBerry failed to realize that
smartphones would evolve beyond mere communication devices to become full-fledged mobile
BlackBerry insisted on producing phones with full keyboards, even after it became clear that
many users preferred touchscreens, which allowed for better video viewing and touchscreen
navigation. When BlackBerry finally did launch a touchscreen device, it was seen as a poor
imitation of the iPhone. BlackBerry saw its devices as fancy, e-mail-enabled mobile phones.
Apple and Google envisioned powerful mobile computers and worked to make sending e-mail
and browsing the Web as consumer-friendly as possible.
Founded in 1984 as a consulting business called Research in Motion in Waterloo, a suburb of
Toronto, the company introduced its first BlackBerry device in 1999. For e-mail-obsessed Wall
Streeters and other corporate users, it was a godsend. BlackBerry pioneered “push e-mail,”
meaning that users simply received their messages when they were sent, instead of having to
constantly check for new e-mails. BlackBerry’s QWERTY keyboard was like an epiphany: no
more pecking at a numeric keypad to eke out messages. In the years that followed, the
BlackBerry keyboard spawned a whole generation of dual-thumb e-mail warriors.
As the BlackBerry exploded in popularity, especially among business customers, the company
became Canada’s most valuable firm, leading some to dub Waterloo Canada’s Silicon Valley.
But while BlackBerry was resting on its laurels atop the corporate mobile market, Apple and
Google were laser-focused on the consumer market, which they correctly predicted would drive
smartphone adoption. In January 2012, BlackBerry announced that its co-CEOs Jim Balsillie and
Mike Lazaridis would step down and be replaced by Thorsten Heins, a German-born executive
who joined the company in 2007. Nearly two years later, Heins has not yet been able to execute a
Sam Gustin @samgustin
Read more: http://business.time.com/2013/09/24/the-fatal-mistake-that-doomed-