Unless something blows up after long-term use, the Galaxy S4 is without question an awesome device. Its by-now-signature 5-inch diagonal high-resolution screen sets the bar for portable displays. The camera is extraordinary for a smartphone with 1080 megapixels -- there are two cameras, in fact, front and rear-facing. I was impressed by the touchless, voice-activated features. The battery has roughly 20% more capacity than its predecessors. And in an interesting reaction to rising security concerns, its Knox security suite allows users to essentially run a work and personal version of their phone. Still, it didn't take long for investors to swing from pre-launch excitement to dissecting the very limited potential of the S4 as a market game changer.
To me, the S4 doesn't just compete with the iPhone 5. It competes against the iPhone 4S and the Galaxy S3 and S2. Oh and what about the Motorola Droid? And the HTC Droid Incredible? And the other dozens and dozens and dozens of touch-controlled smartphones that are deeply penetrated at retail? For many, less is quickly turning out to be more. In December, UBS ( UBS) analyst Steve Milunovich told mobile news site BGR.com that, by his estimates, the iPhone 4S was outperforming the newfangled iPhone 5. And carriers have not been shy about pouring product into this already commoditized market. AT&T ( T) has made its no-cost, refurb models a first option for shoppers. It had little choice. It's competing with aggressive retailers such as Wal-Mart ( WMT), which offers the HTC Droid Incredible, a 4G LTE smartphone, for only $50 and $90 in monthly access fees for unlimited talk and text and 1GB of data. And in such a collapsing market, how differentiated would a dirt-cheap Kindle smartphone from Amazon ( AMZN) be from a Samsung Galaxy S4? No winners, just losers Will there be money to be made? Probably. But not much. Even vertically integrated screen and device makers such as Samsung are feeling the pinch. Not only are phones feeling stiff competition, but the core screen-making business has devolved into a money-losing business for the South Korean conglomerate. It spun off its LCD business after losing some $891 million on screens in 2011. The smart bet in smartphones is now about realizing that when it comes to Apple vs. Samsung, no matter who "wins," everybody will be bloodied.