During the last few weeks, Apple (AAPL) and Samsung (SSNLF.PK) have carefully orchestrated everything possible to maximize 4Q smartphone sales. Apple continues to take the high road with its latest iPhone 4S ad showing Santa getting a little help from Siri (video). Samsung, however, has taken another road with a parody of the iPhone 4S (video).
Yet Samsung hasn't stopped there. This quarter, Samsung launched a barrage of at least six new smartphones to chisel away at the monumental iPhone 4S sales expected during the holiday season. Here’s a brief snapshot of each:
Last week, Samsung’s Galaxy Nexus was launched with Verizon and has nearly the same bells and whistles a consumer can find on the iPhone 4S. Although the 4.65-inch display is not likely to appeal to women - because of its size. At $299.99 in a 32GB configuration with a new two-year agreement, this competes head-to-head with Apple’s 32GB iPhone 4S which is priced at $299.
At the end of November, Samsung launched the Illusion™ smartphone through Verizon’s online store even though it won’t be available until January within Verizon stores. At $79.99 with a two-year agreement, it refreshes the mid-tier of smartphones and provides a price point slightly less than Apple’s iPhone4 (8GB) which is priced at $99 with a new two-year agreement. Samsung’s Illusion has 2GB of memory pre-installed; the user would need to purchase a microSD™ card separately that could allow it to expand to as much as 32GB of support.
Early in November, Samsung launched the Galaxy S™ Skyrocket™ with AT&T featuring 4G LTE speeds ($249.99 with two-year contract). Samsung also launched the Focus S ($199 with two-year contract) and Focus Flash ($49 with two-year contract) during the same time period – two Windows-based handsets.
In October, Samsung launched the Stratosphere™ with Verizon ($139.99 with two-year contract), the first 4G LTE smartphone with a QWERTY keyboard.
Samsung launched all of these to combat Apple’s new tiered offering of the iPhone 3GS, iPhone 4 and iPhone 4S. Yet, at least for 2011, it won’t be enough to slow down the iPhone 4S momentum because consumers still care about:
Apps: Apple has 500,000 Apps versus 200,000 available on the Android market.
Streaming Music: iTunes Match streaming music service allows a 25,000 track limit versus Google Music, which has an upper limit of 20,000 songs.
Simplicity: Despite the advances of Google’s Ice Cream Sandwich software that debuted on Samsung’s Galaxy Nexus smartphone, Apple’s Siri enhancement makes the iPhone 4S even easier to use than before.
Battery life: Now that the iPhone 4S has enabled a normal battery life with its iOS upgrade, a user would need to carry a charger to get a full day’s worth of battery life with Samsung’s Galaxy Nexus; recent tests show that one could only expect about four hours of usage under 4G conditions.
So which company has the edge for 4Q? According to IDC reports, Nokia (NOK), Apple (AAPL) and Samsung (SSNLF.PK) rank 1st, 2nd and 3rd in the year-to-date smartphone market share race. Give the apples-to-apples comparison of offerings and features above, the trends point to Apple.
The YTD snapshot of smartphone market share is shown below. (Click to enlarge)
Here’s what we know about the 4Q outlook and quarterly trends:
RIM (RIMM) reported last week that 4Q 2011 smartphone shipments will be in the range of 11 million to 12 million units; it will mark the first quarter-to-quarter decline in six years during the holiday shopping season;
On October 31, HTC (HTCKF.PK) reported that it expects to ship 12 million to 13 million smartphones in the fourth quarter- its first quarter-on-quarter drop in shipments since the first quarter of 2010.
Nokia sales have tapered off to a range of 16 million to 17 million shipments per quarter.
The “Others” category, the growing herd of Android smartphone clones, has grown from a quarterly increase of 5 million shipments per quarter to an increase of 8 million shipments per quarter.
Setting those players aside, we know that it’s a two-horse race toward smartphone market share leadership between Apple and Samsung. Samsung has been growing an astounding 200% to 300% year-on-year for all three quarters of 2011. Apple has been growing an average of 80% YOY per quarter, including the 3Q anomaly. If you exclude the 3Q, Apple has been growing an average of 125% YOY.
So to keep all data points consistent with IDC’s annual forecast of smartphones, the conservative market share scenario shows the following: (Click to enlarge)
The collective trends cited above would lead to Apple earning the gold medal for the 2011 smartphone race even though Samsung could have the edge for 4Q sales. Apple’s upside opportunity, however, is far greater because:
There was pent up demand for iPhone 4S that was not satisfied during the 3Q,
For the first time in the Apple vs. Samsung bout, Apple positioned a low tier offering of the iPhone 3GS for free (or for $1 in certain states).
Apple launched Siri that was dubbed as an intelligent assistant for adults with no other comparison in the marketplace. Yet Siri also became an entertaining companion for teens.
Thus, Apple iPhone sales will minimally revert back to the average growth that Apple achieved during the 1st and 2nd quarters- about 125%. That growth rate would yield a result of about 36 million iPhones to be sold during 4Q – and Apple would earn the winning prize for smartphone market share leadership in 4Q and for 2011. The projected upside would represent an estimated $4.5 billion of sales. That would be a memorable Season’s Greetings for Apple to deliver on top of its projected gift to shareholders of another record earnings to come.
Disclosure: I am long AAPL.
