Samsung Electronics Co. Ltd. could overtake Motorola Inc. in market share for the second quarter, according to projections from analyst Ittai Kidron at CIBC.
The share shift would be remarkable, based on 2006 results, which had Motorola at nearly 22% global market share for the year and Samsung at 11.4%, according to year-end data from Strategy Analytics.
Whether such a shift would be fleeting or long-term remains anyone’s guess. Samsung’s margins may dip as it expands into emerging markets, while many expect Motorola to make a strong comeback in margins and share over the next 12 months and beyond.
Kidron, however, cited Motorola’s current retrenchment in emerging markets and new, higher-margin handsets launching in late 2007 and 2008 as reasons for its stall and projected loss of market share. The analyst forecasted a nearly 12% sequential decline in handset shipments between first and second quarters of this year, estimating that Motorola will ship 40 million phones in the second quarter, less than any quarter in well over a year.
Contrasting strengths
Even that tempered estimate may be high, the analyst wrote in a note to investors. North and Latin American markets remain strong for the American handset vendor, but Europe and Southeast Asian markets are weakening.
In contrast, Samsung is looking at a 9% sequential increase in handset shipments in the second quarter, to nearly 38 million units, a projection that may be conservative, Kidron said. Much of Samsung’s growth will come in low-tier, GSM-based replacement markets in Asia, the analyst forecasted.
A surge in Samsung’s low-tier replacement sales-handsets below $100 will grow in its mix, the analyst projected-and potential difficulty in meeting its own projections for W-CDMA sales, particularly in Europe, may cause Samsung’s margins to suffer in the second quarter, but rebound in the second half of the year.
“Operationally, the company’s strategy, portfolio and culture are evolving under new management,” Kidron wrote of Samsung.
Motorola declined to comment on the CIBC projections, citing a “quiet period” that bars forward-looking comments on the company’s prospects, according to a spokesperson.
In contrast, Samsung seized the opportunity to argue that projections of market share growth are the outcome of specific operational shifts it has made and that they are, in fact, sustainable.
Change in leaders, not mission
Samsung’s fundamental strategy of delivering premium products has not changed, according to Peter Skarzynski, head of sales and marketing for Samsung Telecommunications America, the Korean vendor’s U.S. arm. That means delivering products that sit at the top of a given price tier, even in the emerging markets’ entry-tier.
With a change in leadership in Samsung’s global mobile telecom business, led by CEO G.S. Choi, improved supply-chain management and “customer intimacy” with partners and channels, the vendor is better focused than ever, Skarzynski said.
Samsung has grown its market share in India and China and its efforts in the U.S. have taken it to the second-ranking here, according to the Samsung executive. In the U.S., in particular, Samsung has more closely aligned its product efforts with network operators’ strategies, Skarzynski said. Those efforts include delivering its Upstage model to Sprint Nextel Corp. at a time when the operator has broadened its mobile music offerings by lowering the cost of music downloads. At AT&T Inc., Samsung has delivered HSDPA-capable handsets such as the BlackJack and Synch at a time when the operator has touted its network upgrades. Verizon Wireless launched its MediaFLO mobile TV initiative on Samsung’s SCH-u620. At T-Mobile USA Inc., the MyFaves program launched with support from Samsung devices.
“We align ourselves with the carriers’ needs as the ‘go to market’ product,” Skarzynski said. “That way we hit consumers, channels and carriers. Then we compete on the value of our products.”
Meanwhile, Skarzynski said, Samsung’s average selling prices remain higher than either Nokia Corp.’s or Motorola’s. Margins already are rebounding, he said, pointing to first-quarter margins of 13%.
Nokia pushing the gap
Besides a newly reheated rivalry between the second- and third-place global handset vendors, Nokia Corp. stands to gain the most from these market share shifts, according to Kidron. Nokia may well surpass 37% global share for the quarter. Sony Ericsson Mobile Communications L.P., in fourth-place, could grow to 9%, and LG Electronics Co. Ltd. could reach 7.4%-incremental gains for both, possibly courtesy of Motorola’s retrenchment.
