Samsung: An Apple Follower

NEW YORK (TheStreet) -- It's lonely at the top, especially without challengers. Complacency is the biggest enemy, and for a while there, and arguably even today, Apple (AAPL) appeared to be getting complacent. Then came Samsung, a true contender in the mobile space that Apple dominates, producing products that are direct knock-offs from Apple products. This is not in doubt - in fact Samsung admits this to be a principal business strategy. But Apple is not fazed.

There will be Samsung fanboys that will argue patent rights, and differentiators, to support their fantasy of an iKiller, a true contender, but they're fooling themselves. Samsung is tied to Apple's coattails and will always be a follower, because that is its strategy. It's a flawed strategy that will only take the electronics giant so far against Apple.

The next battlefield is wearable computers, a market yet to be clearly defined...we're all waiting for Apple to do that. So is Samsung. The problem for Samsung is the not knowing - it simply can't anticipate where Apple will take wearable devices. Moreover, there are places Apple can go, where Samsung cannot follow.

Perhaps the most crucial element of wearable computers, in fact all mobile devices, is the cloud. People are overlooking the incredible infrastructure that will be necessary to support true mobility. Apple has established a presence in the cloud, and it has the resources to dominate it, to an extent that Samsung can only watch. Samsung will remain a follower, and may even be forced to eat Apple's breadcrumbs.

Everything about the two companies is a study in opposites. Samsung kowtows to the mobile carrier, and spends huge money trying to figure out what customers want. This is not leading, this is an exercise in mediocrity - people don't know what they want. Apple dictates the carrier relationship, and directs people to the future, and they love Apple for it. People want to be shown the light, they want simplicity, they want beauty and form that follows function. They trust Apple to do the right thing.

It's understandable that there's such a rivalry among fans of the two companies. It's natural for people to take sides, and emotionally invest in their champion. Once invested, it's easy to be encouraged by a blow from your side, hoping this might be the knockout punch. And then there are those naturally inclined to root for the underdog, it arouses their sense of fairness and justice; there's pride in standing behind the one who must exert more effort, it seems virtuous. But this is a delusion.

I suppose that Samsung does exert more effort than Apple, for sure, just to ride the coattails. The company spends twice as much for R&D, much more for advertising. Samsung invests heavily in its own manufacturing; yet it only garners 30% of the profits. Apple gets the rest. The fact is - Samsung's incredible achievements to date were accomplished by following the leader. This will only take the company so far...soon it won't be able to follow. Only then will Samsung's true colors be displayed.

-- Written by Ernie Varitimos, author of the Apple Investor blog.

Follow @Conservatum

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Ernie Varitimos has a long history with Apple as an investor, trader and consumer of its technology. He started his career as a rocket scientist and has spent the past 25 years driving, controlling and influencing technology in the financial industry. Ernie is a former hedge fund manager and current futures trader.

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