When Samsung revealed its new Galaxy S4 flagship smartphone, it literally did a lot of song and dance about its own unique software features, with nary a peep on the built-in Google Android improvements and features brought by the use Jelly Bean 4.2 on board. I argued that it could be a signal that Samsung is looking to move towards an Amazon-style approach to building its own version of Android, but a new investor note from Sterne Agee analyst Shaw Wu suggests Samsung’s platform bluster might be more useful to the South Korean company as a bargaining chip.
Wu praises Samsung’s move into a more “vertically integrated platform play” in his note, which puts it in a better place to compete with similar efforts by companies including Apple, Microsoft, Google and Amazon who are all trying similar combined approaches to software and hardware. But he also notes that Tizen, the smartphone OS that Samsung is co-developing, has massive challenges ahead in terms of taking away platform share from Android and iOS, especially with BlackBerry and Windows Phone slugging it out for a third spot in the mobile market.
Samsung’s biggest strength, according to the investor note, is that it has a lot of leverage in terms of negotiating a better split of mobile advertising revenues from partners including Google thanks to its dominant market position. Treating their platform ambitions as a sort of backpocket option in case the lucrative deal they have worked out with Google starts to become not so lucrative does seem to be more of a hedge than a realistic option at this stage of the game, given how entrenched the top two platforms are, and the challenges we’ve seen even manufacturers with a wide reach like Nokia and BlackBerry have with populating the software ecosystem for a brand new mobile operating system.
Google has been reported to be somewhat ill at ease with Samsung’s growing dominance over the Android hardware market, but for now the two companies are much stronger together than they are apart, which means we’re unlikely to see either side do anything to initiate a rift. Meanwhile, we’ll likely see both also work on their own hedges, which means Google building out its Motorola division with new, Google-directed initiatives after major restructuring, and Samsung continuing to feint with Tizen and build its own pseudo-platform on top of Android.