What does Samsung's guidance say about Apple?

After reporting impressive guidance, the source of the handset maker's success is analyzed.

By Benzinga Jan 8, 2013 2:49PM

Businessman in car with smartphone copyright Image Source, Image Source, Getty ImagesBy Sam Mattera


Samsung offered impressive guidance on Tuesday, reporting that it had probably earned a profit of $8.3 billion in the last quarter. The company's results were largely powered by the outperformance of its mobile division -- the company sold nearly 500 handsets per minute.


Also contributing to Samsung's success was demand for the company's mobile displays, which appear in a variety of smartphones not made by Samsung. In fact, one of Samsung's largest customers for its displays is none other than Apple (AAPL) itself.


This raises an interesting question for Apple investors: Does Samsung's record guidance suggest weakness for the iPhone, as consumers opt for Samsung's Galaxy devices instead? Or is strong display demand indicative of equally strong iPhone demand?


As competition has increased between Apple and Samsung, both companies have taken steps to lessen their business dependence. There were reports in October that Samsung would end its relationship with Apple in 2013. Those reports were subsequently denied, but Apple has been said to use displays largely from LG and AU Optronics for its iPad Mini, according to Bloomberg. 


As for the Galaxy lineup supplanting the iPhone -- Apple seemed to recognize this threat years ago. Although Apple has targeted HTC as well, its most aggressive legal efforts have been directed at Samsung.


Samsung unveiled the first Galaxy phones early in 2010. They competed alongside the (then newly launched) iPhone 4.


The first Galaxy phones were highly similar to the iPhone, which lead to two companies' well-publicized patent dispute.


But later incarnations of the Galaxy lineup have, to some extent, surpassed the iPhone. Some versions of Samsung's Galaxy S2 (released in 2011) offered LTE connectivity -- a feature Apple didn't add until the iPhone 5.


Samsung's current flagship, the Galaxy S3, offers NFC connectivity (something the iPhone 5 lacks) and a larger screen. Samsung's recent variant, the Galaxy Note II, takes this a step further with an even larger screen and a built-in stylus.


There are rumors that Samsung could launch the S3's successor, the S4, according to Benzinga, as early as March. The iPhone 5 is less than six months old, so an iPhone 6 seems unlikely to appear anytime soon. If that's the case, Samsung could be only a couple months away from widening the distance between itself and Apple even more.


Still, Apple investors might find some hope in AT&T's (T) guidance. The telecom giant said that it had sold a record 10 million smartphones in the last quarter. The wireless giant didn't provide a breakdown between iPhone and Android, but strong smartphone demand in general would seem to be positive for Apple's iPhone.


Apple is set to report earnings Jan. 23, on which day investors will get plenty of data on iPhone sales. Until then, it remains a speculative subject.


Shares of Apple traded near $523.50 on Tuesday, largely flat on the session.


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1Comment
Jan 8, 2013 3:40PM
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AT&T's 10m smart phones is great. Hopefully Apple's sold 5m, Samsung sold 4m and at least 1m where Nokia Lumia's. However, it's now all about China's 1.1b subscribers and Samsung getting about 70% of that market while Apple, HTC, Lenovo, Nokia and others fight for the remaining 30%.
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