Samsung offered a sobering forecast for its upcoming third-quarter earnings, noting that it expects operating profit for the quarter will fall by almost 60% due to sluggish sales of mobile devices. The company's revenue is expected to drop 20% compared to the same quarter last year. Weaker demand for mobile devices also impacted Samsung's chip and display businesses as well.
Part of Samsung's troubles is the growing competition in the low-end smartphone space from Chinese manufacturers that are able to deliver comparable Android devices at lower prices and with lower margins. Apple's entrance into the larger smartphone and phablet spaces last month is also likely to generate more competition for the Korean company in the more lucrative premium device market as well, particularly the phablet market that Samsung defined with the Galaxy Note series of devices and has been largely able to dominate since.
One of the issues accounting for some of Samsung's stiff competition is that, although it creates its own enhancements and customization to Android, they aren't always enough to truly differentiate those devices in an ever more crowded Android space. Many of Samsung's attempts to create its own ecosystem within that space, such as its own app and content stores as well as integrate with its other consumer electronics products, haven't really caught fire with its customers. Some of its customizations to Android and replacements for stock Android apps have annoyed or irritated longtime Android users.
The company's plans to develop Tizen as an alternative OS for use on a range of different devices has largely been scrapped, though some devices - most notably the Galaxy Gear S - do run Tizen.
The one area where Samsung was able to effectively differentiate its devices, albeit modestly in the minds of many consumers and even business users, is with its KNOX security platform and the SAFE program that proceeded it. When the company first announced KNOX, I wrote that it offered significant potential, particularly in the business world. The combination of a secure version of Android, a secure built-in container, and a wide range of management policies could have made it the ideal smartphone for business.
That hasn't happened. There are a few reasons why - the delayed rollout; confusion among consumers, business users, and IT professionals about what exactly KNOX was; the cost of additional license fees to activate KNOX, much of which Samsung has recently attempted to remove as a barrier; and that the platform functioned only on a handful of Samsung devices among them.
Google's development of Android Work as part of the upcoming Android L may be one of the nails in KNOX's coffin as a differentiator for Samsung. Android Work will bring the KNOX secure container to all Android L devices as well as a universal mobile management and security framework.
KNOX is, of course, much more than just that container and the dual persona capabilities that it enables. With the KNOX 2.0 release, the initial security and management capabilities grew significantly and I'd wager that they'll remain broader than what is available as part of Android Work, at least initially. The problem is that Android Work will probably be good enough for most organizations, in much the same way that Apple's mobile management frameworks, introduced in 2010's iOS 4, were never as extensive as those offered for BlackBerry devices tied to a BES infrastructure - but they were good enough for many organizations.
To its credit, Samsung seems to have seen this coming and has finally started marketing KNOX directly to consumers, though primarily as a BYOD-type feature. That's a good move, but it's something that the company could have done much earlier. In fact, clearly and actively promoting just the secure Android base to consumers as a security benefit of KNOX would've been a good move right out of the gate, particularly if it had leaned on its carrier partners for help. In whatever form, Samsung needed to get KNOX into the business user mind, if not the consumer, in a clear and understandable way far sooner than it did.
KNOX obviously isn't the only issue that Samsung is facing by any stretch of the imagination, but I think it does highlight an important issue. Even when Samsung does successfully differentiate, it doesn't quite seem able to sell that differentiation to its customers.
This story, "Samsung Has a Tough Hill to Climb at Differentiating Itself" was originally published by CITEworld.