Samsung stumbles as it tries to move away from Google

Yahoo Finance

Samsung Electronics stumbled again this week, announcing it had indefinitely postponed the roll out of phones running its home-grown Tizen operating system in Russsia.

Tizen, which replaces the Google Android system that powers most Samsung smartphones, was supposed to help make the South Korean company’s phones more appealing, or perhaps even cheaper. Samsung has already introduced smart watches and a camera running Tizen.

But few customers want a smartphone that can’t run popular apps and Tizen doesn’t offer many. In a brief statement explaining the delay, Samsung cited problems with the “Tizen ecosystem.”

The latest problem follows a slew of knocks and shortfalls for Samsung, which shot to the top of the smartphone charts a few years ago as the top alternative to Apple’s iPhone.

But phone and tablet sales have slumped and Samsung reported its lowest profit in two years in the second quarter. Operating income dropped 24% from a year earlier to 7.2 trillion won, or $7.1 billion, for the three months ended June 30.

Google has been increasing pressure on Android phone-makers to stop tinkering with its software, apps and cloud services in an effort to differentiate. Samsung’s Tizen has been seen as an effort to break free of Android, or at least win more wiggle room from Google. Following Google and Apple, Samsung is throwing a developers conference in San Francisco this year in an effort to convince software writers to make more Tizen-specific apps.

Samsung’s Galaxy S 5 phone, which went on sale in April, offered some new features but reviews were mediocre and additions such as a fingerprint reader came across as pale imitations of Apple’s latest innovations.

Apple competes with Samsung at the high-end of the phone and tablet markets. Problems are also brewing at the low end where Chinese vendors like Lenovo, Xiaomi and ZTE offer even cheaper devices. Xiaomi’s Redmi phone, which sells for about $100, was the top selling model in China in April, according to Counterpoint Technology.

Samsung’s tablet sales were just about unchanged in the second quarter to 8.5 million from 8.4 million a year earlier, even as the overall tablet market grew about 11%, according to IDC. Again, it was companies like Lenovo and ASUS gaining market share.

Without Tizen, or some other amazing new features, Samsung will have a hard time competing on price with its lower-cost competition.

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