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Samsung Is No Threat to Google

4. Samsung is investing more in various applications over and beyond plain Nexus Android. Recent examples include the S-pen (stylus) for the "Note" tablets/phablets and the new "Wallet" app, which is basically a copy of the Apple (AAPL) Wallet app. So far, it's not clear that anybody cares about these solutions, at least until Google takes them and makes them part of "standard" Android.

How did Samsung end up in this pole position in the Android world?

1. Samsung is different than most other Android licensees because it has vertical integration for many components, from CPUs to displays/screens. It's not clear that this is a big deal, although it could be.

2. Other companies stumbled. From Sony (SNE) to Motorola to HTC, Samsung's competitors executed poorly in the last few years. Motorola ended up getting acquired by Google, and is now run seemingly fairly independently from Google, with a verdict yet to be rendered except that Motorola seems to continue to be taking forever to bring new products to market.

Hey, it's not entirely clear why Samsung became so large compared to the other Android hardware makers. It seems to be a combination of a lot of little things, including luck and weak competitors. Samsung also clearly executed really well on most things all-around.

Easy come, easy go.

These conditions that led to Samsung taking the lead in Android market share appear to be fleeting, in principle. For Samsung to gain from here, or perhaps even maintain market share, it would need to continue to see competitors falter and for its own execution to be superior. Perhaps this could happen, but the odds are against it.

A few reasons:

1. Sony is getting its act together with its Z line of smartphones and tablets. After years of falling behind, SONY is at last competitive with the best.

2. Motorola may eventually cough up something unique thanks to its privileged position inside Google.

3. HTC is recovering from a poor two years with top-notch products such as the One smartphone.

4. Acer, Asus, Lenovo and others are tired of the shrinking Windows PC market and are devoting more resources to Android (and Chrome OS). These companies have operated at near-zero margins forever.

2 of 3

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