Is Samsung Done for Good?
Is Samsung done for good?
So it looks like Samsung has done a complete recall of their Galaxy 7s, after they told everyone that they had fixed the original problem. But their stock has dropped 8%. However, they are diversified. Do they still have a chance at coming back?
As you said, the stock only dropped 8%. I've seen stocks drop more because the CEO sounded like he had a cold on an earnings call. Will the reputational damage eat away at their market share irreversibly? Is the Galaxy 7 problem an indication of more serious quality control and engineering problems at the company? I have no idea, but Samsung appears to be a going concern.
Blackberry/RIM is still a company and you are asking if Samsung is done for good?
I'm sure Samsung is gonna survive an 8% drop... Anyone else curious about how Samsung will fare against Google's new Pixel?
Google's new Pixel looks like a great device, with a terrible advertising and marketing plan. I assure you ordinary people don't "get" the Pixel and neither Google or Verizon is currently helping.
I was impressed by the supposed time it takes to charge the phone.
I think this all boils down to what your definition of "done" is. Is the stock going to drop? Most probably. Is the company going to go out of business? Definitely not. This may all be overblown.
I mean if you take Twitter as a similar example, people are so bearish on it and saying that the company is "dying". TechInAsia has this Facebook post peddling the tagline "The end is near for Twitter" (https://www.facebook.com/techinasia/photos/a.242673982437689.55836.1757…) sparking all types of panic and reactions on Facebook. But I'd like to point everyone towards the actual financials:
I think that's far from "dying". Does the falling growth mean that Twitter doesn't deserve its current valuation? Very much so, and I've always thought it was an expensive stock. But does it mean the company is teetering on the brink? Probably far from it.
My previous analyst role was at an equity fund, and I know how it feels to see some headline come out and see the stock react in a big way, and you wonder if it's a momentous shift which will cause the company to live or die. Then I moved to VC and realized that companies don't change over the course of a day, week, month or even a year in most cases. Structural changes that make or break companies often take much longer.
Going back to Samsung, Q3 guidance is still a net profit of $4.6 (on $42B of sales), and their balance sheet is nowhere near being debt-heavy.
If you look at the Smartphone market, Android continues to be the dominant operating system globally, and Apple is nowhere near that. That being said, Android is definitely a much more fragmented segment of the smartphone market.
Find more statistics at Statista
However, Samsung is still the biggest player in that market and has historically held on to a significant market share.
Find more statistics at Statista (Sorry for the old data, can't seem to find a more updated chart)
The safety issue is only with their Galaxy Note S7 line, which is in the grand scheme of things, not a giant part of their revenue. This debacle will really have a more profound impact on their brand and reputation rather than killing profits in a crazy way. I think they may be challenged to grow profits in the same way they used to and this will most probably hit market share due to competitors being able to grab more of the incremental smartphone sales than Samsung sales declining. Given the competitiveness of the smartphone market now, this setback may challenge Samsung's dominance (http://www.idc.com/prodserv/smartphone-os-market-share.jsp) but Android phones are still 88% of the smartphone market and Samsung remains the biggest contributor. This may be an opportunity for some of the cheaper players such as Xiaomi and Huawei to grab some market share now that this safety issue hits Samsung's value proposition (way more expensive, comparable features AND a safety issue?).
They are surely not done. The whole move was to dethrone Apple and it backfired (pun intended). That is done.
Isn't Samsung the #1 phone manufacturer in the world?
And it wasnt all Galaxy 7's, just the Note line.
I guess it's perspective issue. They do have largest market share and sales rev and whatnot. However, iPhone is a much better phone and always held the best smartphone title, imo (at least up to iPhone 6s). Whenever Apple introduced a new phone, Samsung basically copied the performances of the phone. With their 7 models, they introduced new features (even though nothing spectacular) before Apple. Now iPhone 7 looks like nothing new. And yes, it is only Note line that explodes (explodes!), it just doesn't give confidence that other models are well made.
And they are above Samsung on FORBES Global 2000.
Firstly, it was just the Note 7s, not the entire Galaxy 7 line. Also, Samsung is responsible for roughly 20% of the GDP of South Korea and literally makes everything. Smartphones are a small segment of their operations, of which the Note 7 is yet another small segment.
Depending on whether issues arise with their other phones and how they respond to the Note line in the future, their high-end smartphone brand MAY be tarnished / damaged, but the Samsung company is fine.
For me, it's not about a temporary dip in their stock or one particular model burning up.
It's a question of trust - they STILL have not done any sort of press conference where they explained what happened. Some of this probably has to do with Korean culture (btw...I will never ever fly an Korean airline/Korean pilots).
I imagine if this was a VR headset and it caught fire while on your face.
Again, I will have a hard time trusting Samsung products and their safety since they rushed out the "safe/replacement" product in a few weeks. Seems like they don't really care about consumer safety.
That's a deal breaker for me. I will not be buying ANY Samsung product. They should stick to making back-end products like the RAM/processors for iPhones etc.
Not quite sure how you're defining "done" in this context, but Samsung Electronics had around $70bn cash on hand (including short-term financial investments) and $8bn worth of long-term financial securities as of the end of June this year. At the same time, they had about $10bn of short-term IBD and $500mn of long-term IBD. This gives them a $70bn net cash position. Given this fact alone, I think they are one of the last companies to go bust in the entire world unless Kim Jongun goes berserk.
But the setback they have experienced on their new galaxy line will definitely come back to haunt them going forward, at least for a year or two. Although I can't tell because I haven't used any of Samsung smartphones in the past, what really separated them between Apple was their manufacturing prowess and precision and reliability. This incident really calls into question of their purported values, and I think this is more damaging than the few billion dollar losses from this.
Samsung is a behemoth. Like people mentioned above, smart phones is just one of their product lines; they have other products that do very well. (e.g. home appliances, TV, chip/processors). Not saying they didn't screw up, they surely did, but there will be very high expectations from consumers when they bring out their Galaxy S8 or Note 8 in the coming year, and they need to kill it.
Taking a hit, but definitely not done. They're a strong player in the market and it's going to take a lot more to bring them down. I give it a year before people forget and move on.
if there's a strong competitor like Apple coming up with more innovative phones, they would be in trouble. Luckily for them, there isn't.
Why it’s not Samsung’s fault that it’s screwed (Originally Posted: 09/12/2013)
All companies see the world from their own belltowers, and the Apple tower is the tallest. - paraphrased from an old Russian saying
Jobs and Cook and the Samsung management will probably fight the Samsung/Apple legal war until the end of the time. Observing from their bell towers in Caupertino and Seoul over the pocketed lawsuit battlefield, the finger pointing, pointless suing, and overall childish absurdity simply in the act of prolonging the act of agony of not coming to a settlement might be explained better understood by taking a longer-term view of one of the two firms: Samsung.
But before starting, it’s important to point out it is not that Apple is more efficient with their R&D spending, or even that their infrastructure to create and innovate is more streamline and better managed, or if Samsung is simply unable to keep up with Apple’s so-called “creativity”, but we can think of the problem in terms of the effect of R&D on both firms. All of us understand Samsung is important in the global arena of blue chip technology – it produces and innovates by expending billions in R & D when Apple, by my last count, spent just 3% of its revenues (about 4 billion) when its counterpart just spent 4.5 billion last month for just some new “R&D centers”. Understanding what those new R&D centers do and how they came to exist is really useful for understanding the trajectory of Samsung.
South Korea has an even older national economy that supports innovation than the U.S.. Since Korea, after the Korean War, bent over backwards to keep its economy growing through export-growth, the objective of every company that survived the policies were to make products that people wanted outside of Korea, you know in the developed (1st world) market, and sell them more cheaply than producers in the U.S., U.K., or Germany could.
This form of systemic policy towards diffusing new technology around the world was copied not just in Korea but in Japan and Taiwan; hence why those countries have very strong tech industries as well. But, what makes Korea different were the components of its economy and how they performed better than the other two that kept Samsung ahead of the pack.
Universities in Korea are overwhelming industry-supported, akin to having a dozen MITs in the space of just one city -- Samsung even bought a university… Sungkyunkwan University in the mid-1990s – and the examples include everything from significantly funding #1 ranked Seoul National University to even where some of the best minds in the country work, the #1 medical school, Samsung Medical Center (which serves an important biotechnology element for S. Korea).
The best talent was often scouted there, where many of the graduates become exempt (once they earn the scholarship) from the laborious task of taking on the country’s two-year conscription program, and with the addition of an added income of becoming a scientist who works at the largest and most prestigious firm in the country.
That’s the university side. Connecting those universities to the manufacturing area are more than two dozen production facilities, which management invests considerably in (hence the R&D centers which are used to create new chips including the 8Gb NAND Memory chip that Apple uses) which historically prioritized reverse engineering (which counts as R&D on the balance sheet). While Samsung has thousands, perhaps even tens-thousands of engineers and systems-specialists, the issue is the firm can no longer simply import technology and reverse engineer it when we define the importation of such technology as physical, mechanical products that need to be broken down and painstakingly made better (by Korean engineers).
Why is what is happening to today not reverse engineerable? Well as Peter Thiel once said the revolution of the last decade has been in ‘bytes, not bits’, and essentially the marginal rate of return for reverse engineering is becoming lower and lower now that you’re faced with the majority of innovation around the world being at the very end of the ICT curve that is digital, not electronic or mechanical, “technology”.
In this respect, adaption of course is a huge issue Samsung faces in the digital arena. Reverse engineering in the other areas allowed it to adapt faster than its U.S. and European counterparts because it’s technology, through the systemic support of university talent and efficient manufacturing know-how, built by the talent spat out a superior product, made their like for like counterparts such as G.E. or Microsoft lose out on market share as they took the time to innovate by instead engineering whole new products through a system that supported creating capital goods rather than on importing them.
But the crux of Samsung’s problem is its entire system is built on reserve engineering everything but design – and when it has encountered or tried reverse engineering the design, the results ends up looking what one New York Judge said about Samsung when he threw out Apple’s attempted lawsuit, ‘that Samsung’s design couldn't possibly be a copy because it’s uncool’.
Essentially, S. Korea’s national innovation system’s emphasis and inability to recognize the importance of other forms of engineering means it is still biased towards the training of “reverse” engineers. Now, for the first time in its long, highly revered history it is spitting out products that are not worse (inside) but simply look worse after prolonged stages of development that involve reverse engineering of the design than their competitors over at Apple.
Interesting, thanks for sharing.
Thanks for the insights! I do think it's a bit unfair to criticize Samsung on their designs relative to Apple though it's quite fair to criticize them for their reverse engineering strategy. Arguably, ALL other consumer electronic companies pale design-wise relative to that standard and they are all playing catch-up as a result. The one notable exception right now from a smartphone standpoint is the HTC One which is stunning yet may end up costing HTC a ton of money because that's an example of putting too much into design at the expense of profitability.
Agreed, although people like the One, and if I had to use an Android phone that would be it, hands down. It's an industrial design masterpiece, on the same level as the iPhone 5 almost. I think its simply that there is a culture of design and detail attention that exists at Apple, and its hard to "synthesize" that, copying or not. Anybody who reads through Steve Jobs' biography will see that above all, design was important to him. Thats why Apple products look the way they do, and are usually so beautiful.
"South Korea has an even older national economy that supports innovation than the U.S." stopped reading after that bit of ingenuity
you know yourboss'sboss, I'm glad you did. A lot of people forget that Silicon Valley was built and bred in the 1980s and 1990s.
South Korea, like it or not, was an economy based on innovation at a time when the U.S. was not -- just look up the definition of a national innovation system and you will see that S. Korea outspends the U.S. ever year in terms of R&D in percentage terms. But now, apparently according to some politicians, we are told we are... and perhaps we maybe but I have to admit S. Korea did beat us to the punch.
A little humility would go a long way there young man.
Apple Fanboyism being pawned as some sort of intellectual prose? Now I have seen it all. Stick to your dayjob, whatever that is.
Next post will be about why Apple is shit. You happy?
One may actually argue that ancient empires had economies that supported innovations, when the US was basically a bunch of trees.
Shallow views like the one from yourboss'sboss' are the grown up equivalent of putting your hands over your ears. It's interesting how someone can overlook the first water distribution system in the world while classifying a slightly difference in the shape of a phone as "innovation".
G.M.. if you don't know anything about a subject, in this case: patents, engineering, design practices, reverse-engineering, culture, Korea, and technology, I would not recommend blogging about it. You obviously are a talented writer, much better than I could ever be, but stay in your field of expertise.
You sound like one of those talking heads on CNBC blabbering about 64 bit processors vs 32 bit processors when they literally couldn't construct a single intelligent thought on the subject.
What would happen if I said I had a PhD and I used to work for Samsung?
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