NEW YORK (TheStreet) -- Last year, when everyone was clamoring for a so-called cheaper iPhone, Apple CEO Tim Cook said, "We're not in the junk business." This was the market Samsung flooded with cheaper alternatives to Apple's high-end devices.
According to data released by research firm IDC, Samsung has already shipped 85 million smartphone units in the first quarter. And when you consider that this is more than the combined total of Samsung's next four competitors, including Apple, it raises questions as to how much demand will there be for Apple's iPhone 6, rumored for release sometime in September.
Samsung's tactic has been clear. It wants to give customers two or three products from which to choose before Apple releases its new iteration. In many respects, this tactical move has worked to perfection. Not only was Samsung able to weaken Apple's margins, but the company also raised the profile of Google's (GOOG) Android operating system.
All told, Apple was being attacked in both hardware and software, which explains Apple's 40% decline from Apple's peak of $705 to below $400. But that's as far as the credit should go. None of this maneuvering has meant anything to Samsung's bottom line.
Consider, Samsung just reported its first-quarter earnings results, which revealed its second consecutive quarter of declining year-over-year profits. Although the results were inline management's prior guidance, Samsung is now feeling the effects of high-end device saturation. Operating profit came in at $8.2 billion, reflecting a 3.3% year-over-year decline.
Likewise, in the January quarter, although Samsung did post an impressive profit of $8.24 billion and a 1.5% year-over-year rise in revenue, there was still a 2.5% decline in mobile revenue. By contrast, in Apple's comparable quarter, not only did revenue increase 5% year-over-year, net income climbed 7%. And this was due to an 17% surge in iPhone unit sales.