The Exchange

Is Samsung Galaxy the iPhone Killer?

The Exchange

By 24/7 Wall St.

There are already nine million worldwide preorders for the Galaxy S III, Samsung's soon-to-be-launched flagship smartphone. The number is incredible when compared to Apple's four million iPhone 4S units sold in the first weekend it was on sale last year. The Samsung phone, considered by some analysts to be an iPhone killer, will go on sale in the U.K. this month and in the U.S. before the end of summer.

Until a few months ago, it was widely assumed that Apple's share of the smartphone market would be so large for so long that no single formidable competitor would arise. Google's Android operating system made it relatively easy for handset companies to adapt and build their own smartphone software. But the market for Android handsets was crowded and included several of the world's largest smartphone manufacturers--HTC, Motorola, LG and Samsung. The large number of competitors with strong balance sheets or large parent companies meant there was a good chance the Android market would be permanently fragmented.

The Android market did not stay fragmented for long. Samsung, the second-largest corporation in South Korea, ramped up its smartphone operations to attack Apple in both the handset and tablet PC businesses. The original Galaxy S and Galaxy S II sold well. The Galaxy S II reached sales of 20 million worldwide in the first 10 months it was on sale. Its initial preorders reached three million--a fraction of the Galaxy S III.

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The first major hurdle for huge Galaxy S III sales will be the U.S. market, because it is so large. Among them, the four largest wireless carriers--Sprint, AT&T, Verizon Wireless and T-Mobile--have more than 300 million customers. The iPhone 4S is still the leading smartphone in America. Samsung will need to make inroads with these carriers to be an unqualified success.

Samsung has new leverage in the markets, both inside and outside America. Its influence with carriers has improved as it passed Nokia as the largest handset manufacturer in the world, as of the first quarter of 2012. Samsung shipped 93.5 million handsets in the period. That means the South Korean company is among the largest suppliers of both inexpensive handsets and smartphones.

Samsung will have to have sustained, impressive Galaxy S III sales to demonstrate it can eventually take the lead from Apple and hold it. Apple sold 35.1 million iPhones in the quarter that ended March 21. That was an 88% increase over the same quarter in the previous year.

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