While we currently we have no indication that Google is planning such a move, it is nevertheless a risk that Samsung can not afford to take. If Android is somehow restricted in any way by Google, all Android manufacturers will have a big problem. Samsung being the biggest Android manufacturer of them all, must have some sort of a backup plan.
In addition, looking at a longer time frame, Samsung needs to develop its own software to run devices and not be dependent on anyone else, or having to pay royalties to Microsoft (NASDAQ:MSFT) for parts of the technology. Ιf I were Samsung, that would have been my thinking. And as I have said many times, Samsung's backup plan is Tizen.
In a recent interview in CNET Korea, Samsung Electronics co-CEO J.K. Shin (head of the company's IT and mobile communications division) made it very clear that Tizen is more than just a pet project for Samsung and that their goal is for Tizen to run everything from smartphones, PC's, cameras and many other devices including cars.
Actually Samsung has made it very clear that they are not happy to rely on Android. During a one hour presentation of Samsung's Galaxy S4, Samsung executives not once mentioned the words Google or Android. The only times those words came out of their mouths was when they mentioned that the S4 would run on Android 4.2.2.
Many people think that Samsung can't make the switch. I beg to differ. I think most people won't even notice the change, if their favorite apps are installed on their smartphone. The OS does not make the phone. Most people buy a Samsung phone because of the quality of the device and because everyone else has one, not because it has Android Installed.
Yes, a full fledged OS switch might come at a cost in the short term, but the benefits to Samsung of being independent of Android over the long run outweigh any short term complications. And as I see it, Samsung is going to make this switch sooner or later.
Tizen is version 3.0 already
While there are currently no Tizen devices on the market, Tizen OS is already at version 3.0. What this means is that development is continuing, even though there are no products yet. If this is not a Samsung and Intel (NASDAQ:INTC) backup plan, I don't know what is.
And recently (just 3 days ago to be exact) Samsung showed off a Galaxy S4 device running Tizen OS. The device is not expected to be on sale until next year, however it is a sign that Samsung has not given up on Tizen as many commentators have said over the past several months.
As I see it, Google will have to make some very hard strategic decisions in the next few years. If Tizen becomes a devices OS contender, then the whole world will not be running on Android devices. That might mean that people will not be subjected to seeing Google ads every time they get on the Internet. Google will lose revenue because of this.
However it gets even worst for Google. As IDC reported yesterday, tablet shipments are forecasted to top total PC shipments in the Fourth Quarter of 2013. This means that fewer people will be browsing the internet via a desktop PC. While Google has great leverage in the desktop PC, it will not have much leverage at the tablet level if Samsung devices will be running Tizen.
Let me remind you that Amazon (NASDAQ:AMZN) has followed a similar strategy with its Kindle tablet. While Kindle runs on Android, it is not dependent on Google services to run and for the most part, people don't even know that Amazon Kindle tablets run a different version of Android. This permits Amazon flexibility and makes it less dependent on Google. In addition, very little in terms of Google ads appear on a Kindle.
As for Apple (NASDAQ:AAPL) I don't think it will be affected at all. This is a battle between Google and Samsung and Apple has little (if anything) to fear from an all out war between the two companies.
I think this war will probably favor Microsoft also. Microsoft has not been able to gain much traction in the devices space. Its acquisition of Nokia (NYSE:NOK) hopefully will help in that direction, however in the tablet section Microsoft has almost zero penetration. If Samsung indeed switches to Tizen, that might be a good opportunity for Microsoft to differentiate and get some market share. There's nothing like an all out war between third party competitors to help you gain traction.
I never prescribed to the theory that Android has to be the only devices OS in the world, In fact I have always said that there is room for everyone (Including Blackberry). Right now Android controls the world, but that might change over the next few years, if and when Samsung decides to dump Android. Remember it took Google just 5 years to conquer the world, there is no law that says Samsung can not become an Asian OS contender, or that Google's market share can not unwind over the next 5 years.
Samsung's co-CEO has said in very plain language that it is Samsung's intention to port everything to Tizen. The fact that the Tizen OS is in version 3.0 and that Tizen is already ported to Galaxy S4 phones is ample proof of Samsung's intentions. As far as I'm concerned, the signs that Samsung is very serious about Tizen are all over the place. I hope Google takes them into account, for they will be the biggest loser (and probably the only loser) if and when Samsung decides port everything to Tizen.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.