Latest Android financials show it’s a Samsung game

By | January 7, 2012, 8:06am PST

Summary: Two of the biggest OEMs in the Android space are losing sales to Samsung, showing it is the company to beat.

Android has grown rapidly as a platform due to the number of companies adopting the platform and churning out one device after another. The huge number of Android device activations has allowed the major OEMS, HTC, Samsung, and Motorola, to have good financials for a while. The latest financials from these OEMs indicate that may be slowing down, with HTC and Motorola losing sales to Samsung.

Analysts usually compare Android to iOS in the platform wars, but with a lot of companies using the former it doesn’t mean everyone is making good profits. Profit is the name of the game after all, as Apple is clear to remind us at every opportunity.

HTC has been making money the past two years, but its recent financial forecast is slowing down dramatically. It reported quarterly profit dropped a whopping 26 percent, due to slower sales of handsets.

Motorola Mobility, aka Google-to-be, reported that holiday sales were flat (actually down in the quarter) and it only expects “modest profitability”. Google is in the process of buying Motorola Mobility, so this can’t be good news for the platform maker.

Sales and profitability in Android may be down for those big two OEMs, but Samsung has picked up the slack for them. The company has reported a record quarter, with profits up 22 percent over last quarter. Samsung will post a whopping $4.5 billion in profits this quarter, obviously grabbing sales from both HTC and Motorola Mobility in the process.

It’s easy to get caught up in the platform wars, and lump all Android players in the same sales basket, but this is not proper. Each company using Android is in essence competing with the others, in addition to the other platforms.

The big uptick in sales and profitability for Samsung makes it clear why Apple has chosen to make the company the target for its unflagging patent wars. It is obvious Apple viewed Samsung as the Android company to be most concerned with, a strategy that now looks correct.

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James Kendrick has been using mobile devices since they weighed 30 pounds, and has been sharing his insights on mobile technology for almost that long.

Disclosure

James Kendrick

James Kendrick has no affiliations or relationships that need to be disclosed.

Biography

James Kendrick

James Kendrick has been using mobile devices since they weighed 30 pounds, and has been sharing his insights on mobile technology for almost that long. Prior to joining ZDNet, James was the Founding Editor of jkOnTheRun, a CNET Top 100 Tech Blog that was acquired by GigaOM in 2008 and is now part of that prestigious tech network. James' writing has appeared in many print publications: Smartphone and Pocket PC Magazine, Information Week and Laptop Magazine to name a few. James' coverage of the mobile technology sector has regularly appeared in the New York Times, Salon.com and CNN/ Fortune online. Not just a writer, James has filmed numerous video reviews and how-tos that have garnered well over a million viewers. He has appeared on local news segments and been interviewed by the Associated Press on mobile technology topics. Additionally, James has been podcasting about mobile technology for years.

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RE: Latest Android financials show it's a Samsung game
Rabid Howler Monkey 9th Jan
@JamesKendrick I dug into this a little and discovered that Samsung made 1.5 billion U.S. from the sale of their hard disk business to Seagate. This leaves 3 billion U.S. for high-end TVs and mobile phones, among other things. And mobile phones include both smartphones and feature phones.

Attributing the entirety of the 4.5 billion U.S. to Android smartphones is nothing but a Linux fanboi fantasy.
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Not a surprise
rhonin 7th Jan
Samsung has great devices on all the major carriers. The others don't.
They also have a good variety.

I do a good bit of research before I buy (usually).
My choice when I switched from an iphone4 was the SGS2.
Then came the Skyrocket. Got it.

Have a great thin, high powered, long lasting, screaming, LTE phone that does everything I need. Now my son is bugging me for the Note.
Chuckle.....
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Surprisingly....
rhonin 7th Jan
@rhonin
Over the last year, my family has migrated from the iPhone to Android.
I just realized they are all Samsung.
SGS2Skyrocket, SGS2, Infuse, Captivate.....

Wow shocked
@rhonin
There are at least two iron boxen in that list. happy
Competition is good.
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Or, at least, that Samsung is large and diversified enough that it can 'carry' it's Android mobile device business. Any information on how profitable Android mobile devices were for Samsung, relative to HTC and Motorola Mobility? Is this information broken out anywhere within Samsungs total business?
@Rabid Howler Monkey Android is hugely profitable for Samsung and making up for disappointments in its other product lines - notably TVs. Much like Moto Mobi and HTC credited Android with saving their profits in 2009 and 2010.
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@symbolset Am not disagreeing with you, but: Links? ditto for James K.
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Contributr
@Rabid Howler Monkey Only figure is the $4.5 billion in profits, attributed by Samsung to smartphones (not tablets apparently)
@JamesKendrick Tablets would have been there as they were taking off in Europe until Apple went running to tell Daddy that Samsung was winning!
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@JamesKendrick I dug into this a little and discovered that Samsung made 1.5 billion U.S. from the sale of their hard disk business to Seagate. This leaves 3 billion U.S. for high-end TVs and mobile phones, among other things. And mobile phones include both smartphones and feature phones.

Attributing the entirety of the 4.5 billion U.S. to Android smartphones is nothing but a Linux fanboi fantasy.
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And you still think Android=monopoly?
Hey, it's Saturday, James Kendrick! As a couple earlier comments implied, EXCELLENT article... indeed you make clear points. Thank You!
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You bought WHAT?
Robert Hahn 7th Jan
Is it too late for The Goog's shareholders to start asking questions about the wisdom of acquiring Motomobile? If the "back out of it now" price is lower than the purchase price, now might be a good time to revisit the decision to buy a handset maker who is -- frankly -- a little too small to run with the big dogs.
@Robert Hahn

I think they just wanted the patents? Personally I think they should've spun off the hardware unit earlier.
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@zeth06 All they got were about 18 patents (mobile related) ... and none of them will help them defend from infringing on patents, copying and/or stealing from others.

It is kind of hard to use a patent defense .... when everybody already has a license to use them.
@zeth06

Um the deal hasn't yet been finalised you know...
@Wackoae they got 20k+ patents! A lot more than 17 were mobile and some of those 3G patents won an injunction against Apple that could ban all their 3G devices in the future which could make Apple a one trick pony with only their first 4G device left for sale in all of Europe!
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And how exactly do they do that other than publishing quarterly earnings which they are mandated to do as a public company?
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Why did Apple target Samsung
global.philosopher 7th Jan
Mostly because Samsung is copying Apple whole scale from look and form to touch wiz to advertising to icons to covers to accessories to pricing and so on.
The others at least try to be a limitless different in some aspect or another.
@global.philosopher Touchwiz is not a 100% copy of iOS, iOS is retarded compared to Android and Touchwiz!

Also, the phones have had a look and personality all their own for about 2 years now so it is fraudulent to claim they are whole sale copying them.

I suppose Apple ripping off all those ideas from people with rejected Apps has never helped their bottom line either huh?
@global.philosopher

Samsung is now set on coping the whole theme of Apple's iPad commercial with their latest Galaxy Tab commercial. They even copied the use of the same dinosaur app that Apple used in their iPad commercial. They went as far as hiring the same child actress who stared in Apple's iPhone 4s commercials.

http://www.theverge.com/2012/1/2/2675592/samsung-galaxy-tab-ad-poaches-child-actress

But the Android fanatics will continue to defend this sort of thievery.
screwed.

From court documents and related data it is shown that Google plays favourites with its OEMs, selectively restricting access to Android information (stuff in the new release, datelines, access to code etc).

If one day Google decides to limit all 'new' stuff to Moto first saying it's like special Google device (like a Nexus phone) to 'test out new software' , Samsung can be screwed very fast.

Google has been known to play fast and loose with its 'openness' concept . As Google makes relative little money off Android from advertising (maybe 1 billion a year from 2.5b total mobile revenues) and Motorola is costing 12.5b or about 10 years Android revenues, Google better figure a way to make money off Moto fast.

Microsoft did the same thing, screwing it's PlayforSure music partners with the proprietary Zune. Although Msft failed with the Zune they realized owning the whole enchilada is where the real money is nowadays. Apple makes at least 50 times more money off mobile than Google does of android.
@Davewrite

I hardly think Google is going to "do one over" on Androids biggest player, when all Google cares about is marketshare for its adverts.
@Bozzer

if you read my post and did some research Google makes peanuts off mobile ads regardless of the Samsung 'market share' etc. Samsung selling lots of phones is not translating to Google's profits that much.

Like I said apple is making fifty times or more than google in mobile by producing hardware i.e it will take 50 years for Google to make in ads what Apple makes in one year... go chew on that.

Android has already supposedly 40-50% market share so how much can it grow. If it DOUBLES google will be making 2 b a year off android BEFORE minusing expenses like R&D, support for multiple OEMs, updates and small things like 12.5 b for buying Moto and 750 m for Ad Mob etc....
Apple makes 10 billion off iPhone alone a QUARTER before iPads, itunes, iApps , iAds.. etc.

PLUS... get this:
Google probobly makes more money from Apple's iOS than Android (Google says two thirds of all mobile searches come from iOS, the other one third from android, blackberries, etc). Apple also takes the vast bulk of app revenues, android app revenues is very low.

all this is a big fat incentive for Google to try to muscle in on more profits via Moto hardware to justify it's monster 12.5 b purchase price to investors.

(I own both google and apple stock)
@Davewrite Google Makes 2.5 Billion off of Android! That is not Peanuts but rather you trying to skew things again!
@Davewrite

on Android for each Android handset. TAC really hurts them.

The data was based off of 2009 mobile browsing data stats (number of searches, ad click throughs, key word length of search and other things) published by Google comparing desktop use. The hope was over time, this number would grow but I am guessing the aggregate is actually sliding downward as Android becomes the new QMS phone. Basically, the data was based mostly off of iPhone user's data and every web statistic shows a greater average utilization of iPhone devices when compared to Android.
@Bruizer

thanks for the info. didn't know about the study you were referring to but I do know that vast numbers of Android phones counted in market share don't even run Google search of services. They run Bing, Yahoo and in China Bidu. Millions of them like OMS phones in China can't even run Google apps. Also from web usage stats show iOS has way larger usage than Android. Market share numbers don't necessarily translate to big Google profits.
@Bruizer Wait, I will make up some stats that show the same thing about iOS! You see, Stats are a way of showing the data you want to convey and nothing more!
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Or you outright lie. Do you still think CY3Q had Android devices outselling iOS devices 3.7:1? Or did you just make that number up? The amount of made up stuff and outright errors in the majority of your posts is astounding. It is no wonder why you are unwilling to consider facts, statistics, logic or rational opinion drawn from data. You make up your mind based purely on emotion (I hate Apple so must love Android) and then look for any data to back it up even if it is 100% wrong or fabricated.

Only someone with no understanding in math or science would make a crazy statement of:

"Stats are a way of showing the data you want to convey and nothing more!"

That is a comment based on ignorance. Stats can be used to warp view points but not when they are used correctly (something you have never done as demonstrated above). Stats are the foundation of everything Google does. It is the foundation of their search and ad engine. For a bad use of stats, look at most every USA [Today] Graph of the day on the front page. The graphs are so warped in their presentation they loose meaning.

For lots of raw data simply go to:

http://gs.statcounter.com

or

http://www.netmarketshare.com/operating-system-market-share.aspx?qprid=8&qpcustomd=1

And look at the data. Do filters on different regions, continents and countries. Look at different dates and trends. Bring the data into Excel and have fun. What is going on in Africa? If Android is outselling iOS (as you incorrectly claim) 3.7:1 then why are people not using those handsets to browse the web?

Not all of the data matches up. There is a huge disconnect between claimed devices shipped and how people are using these devices. It is an interesting question and many of the answers are not favorable to Android's future financial health because that health is based on Google making money. Last quarter Google let us know their mobile effort brings in $2.5 billion/year. Over 2/3 of that is from iOS with the remainder being from Android, WP7, BBOS, Symbian.... Other data based off of known TAC, Google published mobile search behavior, known Google ad rates, Google published click through rates, and payouts shows Google makes $0.11/Android handset/month. Published peer reviewed data went into the analysis. Good stuff.

My guess is you are to scared to actually go down the rabbit hole, find the data and ask the questions.
@Davewrite Bullshat! They always have one vendor they work with on new products and that is all the document showed!
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@Peter Perry

I shouldn't waste my time with you because I can't count the times I've whacked you silly in debate but what the heck:

Here is the Google document which Google tried to stop but which the court forced them to reveal: (I cut and paste):

"Do not develop in the open. Instead, make source code available after innovation is complete

Lead device concept: Give early access to the software to partners who build and distribute devices to our specification (ie, Motorola and Verizon). They get a non-contractual time to market advantage and in return they align to our standard"

dumbo what does : "Give early access" and "They get a non-contractual time to market advantage" mean? lol.

what it means is that Google selectively chooses vendor it wants to give 'special treament to'

and you say "always have one vendor" etc... EXACTLY, google can just say Motorola is the vendor and Motorola will get the early bird advantage. (many of the smaller oems have complained they don't get access like HTC, Samsung and Motorola for early builds etc and now the documents show absolutely 'preferential treatment' is a company policy - and Google is likely to do it again for the reasons I've stated, the main one being money. Google has ALREADY given Moto selective treatment in the past so are they more or less likely to do more AFTER they've spent 12.5 billion or 10 years android revenues on it ? .. ) IF Google decides to increase Moto's advantages to access Samsung is screwed.

Bullshat? lol... as USUAL you're the one pooping in your pants.
It's the screen! Samsung puts a beautiful looking screen in every one of their own handsets and people love them!

HTC started using Amoled in the Incredible and EVO but was forced to adandon it when Sammy couldn't make enough to support both HTC and their own handsets. It is safe to say that the thunderbolt (first 4G handset) is the only top seller they have had since that time.

Now the Rezound is out and has an HD Screen as well as Beats Audio Marketing so let's see how that works out this quarter.
@Peter Perry

Do you think it is going to have a sudden resurgence? If it was not a top seller last quarter, why is it all of a sudden start selling well now?

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