A Day Samsung Would Like To Forget

| About: Samsung Electronics (SSNLF)

Friday, March 15th should have been Samsung's (OTC:SSNLF) day for big stock gains. It had only the day before unveiled their highly anticipated Galaxy S4 smartphone to the media and a hall of friends in New York. But instead of gains, March 15th will be a day Samsung brass would like to soon forget. In the wake of Thursday's introduction of their new Galaxy S4, Samsung's stock price fell while Apple's (NASDAQ:AAPL) stock price grew -- almost in point-by-point tandem. It was a day which had an almost Rod Serling character to it.

It was an outcome no one predicted. But in hindsight, there are some points to consider.

The Lead-Up: Rivalry & Tension Mounts

Across the net, it was a given: Samsung was coming to New York City to introduce their new Galaxy S4. Yes, Samsung would throw-down on Apple and after they were done, the world would see just how out of touch Apple had grown -- or so the declarations and variations enthused. Expectations were high. Maybe they were too high.

On Wednesday, March 13, Apple's Senior VP of Worldwide Marketing, Phil Schiller, derided Android as a "fragmented" mess that kept over half of its users on a version two years old or more, according to surveys conducted by Apple. Only 16% are a version a year old or less. He even went so far as to say that the new Galaxy S4 would more than likely ship with a year old OS, standard. Be ready to upgrade, once they get it fixed. Or something to that effect.

Sour grapes? Maybe. Apple has no love lost for either Android or Samsung's new smartphones, products that Apple says clearly violate their patents and intellectual property. Many agree, many don't. Lawyers are getting rich from the debate.

It's clear that the usually tight-lipped Apple was feeling a bit uncomfortable to see Samsung getting the kind of press attention once only lavished on Apple product roll-outs. An Apple bereft of its ever-silent historical stoicism is a rare kind of Apple indeed.

In the wake of Samsung's Galaxy S4 introduction, the Korean manufacturing giant's worst nightmare came true: Apple's stock rallied -- rising 2.58% for the day -- while Samsung's stock dropped -2.63%. Samsung's loss was clearly Apple's gain. You can only imagine both the cheering and the groans in the respective company offices in California and across the Pacific in Korea.

Apple stock saw a lift of $11.16 per share for the day. Samsung stock fell, losing $36.00 on the day (when converting the South Korean Won to the US Dollar).

Yes, something was clearly out of sync and the market was responding in a way that executives at neither Samsung nor Apple expected.

Managing Expectations

Managing expectations is an art that many companies have to learn to wrestle as they grow their companies and expand their product lines. The stress grows exponentially when products reach the kinds of success that Samsung has found with its smartphones.

There is no doubt about it: Samsung is a big company -- one that is experiencing a level of success that is new to them. The level of product adoption and media adulation that they have been getting is the kind of thing hard-wired into Apple's corporate DNA. It's part of Apple's corporate culture. But Samsung is new to this kind of market.

If Phil Schiller Is Right

Schiller called Android a convoluted and fragmented mess -- to paraphrase his words. Having used a Galaxy Note II for just a month now, I have to agree -- somewhat. Maybe not a mess but surely lacking the refinement and elegance of iOS. That said, I love my Note II but it is clearly no iPhone. I have been using an iPhone since v1 and have been using Apple products since 1983. I know what Apple gets right and what it doesn't.

If Schiller is right and I believe that he is, Samsung needs to tear the truth out of Phil Schiller's words and beat them into a shape that works to Samsung's advantage. How? I'll give you the following illustration:

As someone who has worked in the media production world for decades, I've been saying for years that, "The difference between an amateur and a pro is that the amateur looks at the first 90% that takes 10% of the time to complete and says, "Wow, look at this!" But the pro belabors the last 10% that takes 90% of the effort to finesse and only then says, "Now, look at this!"

Software is what people really want, the hardware is just what makes it work. Right now, while the Samsung hardware is light years ahead of the iPhone, the software is a long way from the kind of "final 10% polish" that makes the iPhone such a great device.

Perhaps this is one of the reasons that you read about Apple cutting into BlackBerry's (NASDAQ:BBRY) corporate market but I cannot recall reading that Android was enjoying the same kind of success in the business arena.

Power is Samsung's crown. The crown of polished finesse has long belonged to Apple. But things change, don't they?


Perception is everything in a marketing war and while the perception of late is that Apple is moving much too slow, there is also a perception in the marketplace that the Samsung devices are not quite there, yet. Powerful, but lacking that "final 10%" that makes the case for the iPhone, so compelling to many.

Samsung has done a great job of building powerful hardware. They have also done a good job refining Android for their devices. They have even succeeded with commercials driving the perception that the "cool factor" once enjoyed by Apple alone, now has company. But until Samsung polishes Android to that "final 10%," many of us will likely have the kind of reaction that Samsung witnessed following the New York event. Exciting, cool but not the promised Apple killer many were expecting.

Killing Apple is never easy; just ask Microsoft, HP, Dell, Gateway and many others.

Yes, all is not well in the Land of Apple and many people have been jumping to Samsung because they feel Apple is not moving fast enough. I am one of them, a lifetime Apple user since 1983, now happily using a Note II. But many see an "almost there but not quite yet" quality, currently at the heart of Android.

It is my suspicion that many of the people who watched Samsung's long awaited rollout of the Galaxy S4, came away unconvinced that these issues have been resolved and now wonder what the team in Cupertino will roll out next. Whatever it is, the battle between these two leviathans will benefit both consumers and stockholders.

I plan to play it safe: I have stock in Apple and have been setting up a trading account in Asia so that I can buy Samsung on the local exchanges. I expect to see both companies grow.

Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.