There have been renewed discussions on Seeking Alpha and elsewhere of Google (GOOG) Android versus Samsung (GM:SSNLF) Android since the launch this past week of the Moto X smartphone by Google's Motorola division.
I offer my opinions and forecasts here based on more than three decades of closely following the PC, cell phone, smartphone, tablet and artificial intelligence sectors. While this experience provides valuable insights, there are important differences in today's rapidly changing world.
Before launching its Android smartphone OS, Google had a close relationship with Apple and Google Chairman (and then CEO) Eric Schmidt was on Apple's Board of Directors. However, when Android was launched, Apple founder Steve Jobs objected to Google copying the iPhone so greatly, calling it theft of Apple technology and innovation.
Schmidt subsequently left the Apple Board and the relationship between the two companies reached a low point. Google then decided it needed to replicate the Apple ecosystem of hardware, OS, apps and optimizing how they all worked together to provide a superior customer experience and draw users into being so wedded to a range of products and services that they would not easily leave.
This decision led to Google presenting a developing ecosystem at its I/O developer events last summer and this summer. The advances it presented at this year's event were substantial and numerous enough that they represented a significant challenge to Apple's ecosystem lead.
This intense ecosystem competition between Apple and Google is resulting in a duopoly which BlackBerry (BBRY), Microsoft, Samsung, Nokia (NOK) and others cannot easily duplicate and be fully competitive. A major reason is that the vast majority of independent software developers are focused on creating apps for just the Apple iOS and Google Android ecosystems. Microsoft and Blackberry are trying to pay some developers to create apps for their OS but with only limited success. Some Window 8 Nokia Lumina and BlackBerry Q10 smartphones have been well reviewed as hardware devices but sales are lackluster because they are outside the iOS and Android ecosystems and the huge number of apps available for them.
Over the last two years, Samsung executed the best Android smartphones, including with large screens with the Galaxy S3 launched last year. The S3's large screen alone made it a surprisingly tough competitor to the Apple iPhone 5. However, the Galaxy S4 launched this spring with mostly just incremental improvements over the S3, has proven to be a disappointment and production has been scaled back this summer. Even near the end of its life and with a smaller screen, the iPhone 5 is remaining very competitive with the S4 in many markets including North America.
Against this backdrop, Google last week launched the Moto X to compete with the S4 and iPhone 5. It includes a number of creative features that depend on innovative software additions to Android that may not be provided to Android licensees like Samsung if they do not sell their devices with the Google version of Android rather than adding their own interfaces and other tweaks.
Just a couple of the initial innovative features in the Moto X include:
1. Learning its owner's voice and responding to it without the pressing of any buttons. In a car or in a pocket, its voice response service will provide information, make calls, etc. hands free.
2. A quick twist motion will put the Moto X in camera mode ready to immediately take photos and with holding a finger on the screen film video. And with the slide of a finger, the camera will zoom in and out.
We expect the Moto X will be optimized to throw streaming video to TVs with Google's new $35 Chromecast device and to perhaps serve as an even better remote control than other iOS and Android devices that can also throw and control video streamed to TVs.
The Moto X and Chromecast are just two examples of innovative new Google products with unique features, announced in recent days. The Chromecast quickly sold out and is backlogged to late August on Amazon at this moment. My personal July 27th Chromecast order is newly promised by Amazon to be delivered not until August 21st.
Initially, the Moto X that will ship late this month or early September is being sold only in the Americas. In Asia and Europe, Motorola never had the strong cell phone market share it once had in the Americas. And rebuilding in those regions will take time, money and a full range of smartphone products. If the Moto X sells well in the Americas and is joined later this year with a lower end Moto X device (as promised by Google), Motorola can potentially approach the Asian and European markets in 2014 or 2015.
This means the Moto X will not likely soon disrupt Samsung's strong market position overseas, despite likely taking between moderate and substantial share of market in the U. S. It will also have to contend with the likely increased competitiveness of AAPL with its new less expensive iPhone due soon. Some sources suggest it will be called the iPhone 5C, compared to the iPhone 5S designation for the next high-end iPhone replacing the iPhone 5. Both are expected in the next 2+ months.
In emerging markets, many people have never owned a computer, smartphone or tablet computer, so lower priced phones are their first computers. Samsung is very well positioned to take much of this emerging country market share. And so is Apple with a more affordable iPhone.
The global smartphone market is huge and still rapidly growing and evolving. There are various segments and geographical differences, so we have to be careful to not over generalize when forecasting who will be successful and who will not be.
We expect Google to be progressively more successful in its drive to more greatly replicate an Apple-like ecosystem around Android. It will do so via Motorola in smartphones and with its own Nexus brand in tablets. Samsung will likely lose market share in the Americas to Apple, the Moto X and other Motorola Droid smartphones that are looking increasingly competitive. Especially if Google/Motorola aggressively supports them with advertising. This is a very important point. Apple and Samsung spend hundreds of millions of dollars each year promoting their smartphones. Google needs to do the same.
The Moto X and other Motorola Droid smartphones may only gradually drive meaningful revenues relative to Google's sales. However, if they cut the Motorola operating losses and help build the Google ecosystem, they can add to the image of the company on Wall Street and hence benefit its share price.
BlackBerry and Microsoft appear likely to continue being only bit players with only single digit market shares because they are already too far behind in competing with the Apple iOS and Google Android ecosystems.
Apple and Google are two of the most innovative companies on earth. They are no doubt developing many exciting and potentially very successful new products and services that cannot be seen or even imagined today. This makes them even more attractive and likely rewarding as investments for investors. We suggest you consider making them cornerstones of your growth portfolios.