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Samsung Still Dependent on the Smartphone

Diverse business lines don't make the tech giant immune to the whims of the smartphone market

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Smartphones have been the high tech “it” device this decade.

They’ve been the driving force behind the spectacular growth of some players, and some former technology superstars have been seriously damaged by failing to make a splash in the smartphone market. However, the global smartphone market is maturing.

With shipments slowing, average prices falling and competition increasing, companies that rely on smartphone profits are taking facing a reality check. Apple (AAPL) has been the poster child for this effect, with enormous iPhone profits driving its stock to $700 last year and concerns over weak demand eroding 37% of its value since then.

You can officially add Apple’s primary competitor and the world’s biggest mobile phone manufacturer — Samsung (SSNLF) — to that club. Sales of its flagship Galaxy S4 smartphone have been weaker than expected, resulting in a $24 billion hit to its market cap since the device’s April release and a 20% decline in its stock price since reaching a high of $1,500 in February.

There are companies that face a very real threat because of their reliance on the smartphone market. BlackBerry (BBRY), for example, is one of those former technology superstars that misplayed the whole smartphone revolution and has paid a heavy price. By focusing on enterprise customers even as consumers drove the explosive demand for smartphones, the industry pioneer let Apple, Samsung and smartphones running Google’s (GOOG) Android operating system dominate the market.

Today, BlackBerry’s stock is down 94% from five years ago, its new BB10 operating system and handsets are failing to stem desertion and with Microsoft’s (MSFT) Windows Phone edging it out for third place in platform market share, BlackBerry’s continued viability is in doubt.

Nokia (NOK), while not in as dire straits as BlackBerry, is another former superstar that has fallen on hard times during the smartphone era, shedding 90% of its value in the past five years. The former world leader in mobile phone production tried to push its own Symbian operating system and took a beating as consumers showed a clear preference for Apple’s iOS and Google’s Android.

As if things weren’t bad enough, while Nokia was failing to crack the smartphone market, its feature phone sales began to plummet as the devices fell out of favor. The company eventually threw its lot in with Microsoft’s Windows Phone and has made some progress with sales of its Lumia smartphones in recent months, but remains an also-ran who lacks products other than mobile phones, leaving the company very vulnerable to the softening market conditions.

While Samsung has benefited tremendously from the smartphone market, you might think it would be less vulnerable to threats like price pressure and slowing demand compared to most of the other players. While BlackBerry and Nokia are dependent on mobile phones and Apple has only its tablet business, a declining PC industry and sidelines like iTunes and Apple TV to bolster iPhone sales, Samsung has a huge product range.

Article printed from InvestorPlace Media,

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