Samsung Electronics Co Ltd (KRX:005935) (LON:BC94) was expected to depart from Android to a new mobile operating system known as Tizen. The transition was expected to start this year with Samsung shipping at least one Tizen phone in 2014. However, at appears Tizen project has encountered several snags that the company cannot release a phone based on the new OS before the end of this year.
Android competition
Samsung has seen its profits decrease because of the high competition from the other Android phone manufacturers. Android phones have flooded the markets that to some buyers, Android phone is just an Android phone regardless of who manufactured it. As such, Samsung was betting on Tizen to help it continue growing in sales and profits. The company faces immense competition from the manufacturers of cheaper Android phones. Therefore, it needed a way to differentiate its devices to attract more sales.
Although there appears to be challenges with the launch of a Tizen phone in 2014, there are rumors that Samsung could launch a Tizen phone in India very soon. However, such will remain speculations because there have been no confirmation on that regard yet. Still, hope remains alive that the Tizen project is not dead. It is expected to ship on a number of devices in the emerging markets starting next year.
Tricky undertaking
Tizen is not far from Android, which is controlled by Google. However, it lacks the robust app ecosystem and service that come with Android. According to some analysts, the lack of popular apps on Tizen could make it hard for Samsung and others adopting the OS to convince customers to buy Tizen phones over those running Android. The analysts believe that Tizen could face the same challenge as BlackBerry or Windows Phones, whose lack of robust apps has slowed down sales.
Profit distress
Profits at Samsung tumbled 60% in the last quarter. Much of the challenge for the company can be traced to the robust growth of China’s Xiaomi. The company makes powerful phones but price them cheaply, thereby giving it an edge against Samsung and other competitors in the emerging markets, especially China.
Although Samsung is expected to post better profits in the current quarter because of the holiday sales, the launch of iPhone 6 and iPhone 6 Plus is likely to complicate things for the company.
