Contrasting fortunes at Samsung and HTC show Google’s risk

By Caroline Gabriel, Rethink Wireless

Android is turning up in phones and other devices from a huge range of vendors, but a two tier structure is emerging in the segment. The highest profile Android events – Verizon’s launch in late 2009 and Google’s Nexus One this week – have both centred on HTC and Motorola, and these two are also AT&T’s initial Android partners (with Dell). Google seems to be anointing the two suppliers as its inner circle, but the approach carries the risk of being overly US-focused, and alienating the vendors which could really make Android a mass OS, Samsung and LG.

Samsung and LG have both announced Android phones but are pursuing multi-OS strategies, and Samsung insiders said this week that this was pushing them “to the sidelines” of Google’s thinking. Google itself denied that certain partners would receive preferential access to its technology enhancements, but the notion of a two tier system is taking hold.

Yet the contrasting fortunes of HTC and Samsung this week highlight the short sightedness of excluding the world’s second largest phone maker, especially as it has promised to make a serious play for the open OS smartphone market in 2010.

HTC reported a 31% year on year drop in net profit, to NT$5.58bn ($175.1m) in its fourth quarter, while Samsung forecast an operating profit of $3.45bn in the same period, plus record high sales. HTC’s revenue fell 13% to NT$41.08bn. The firm blamed high marketing costs and rising competition for its profit shortfall, and although it has done well in getting US carrier deals for its Android phones, taking advantage of its long headstart, it is now facing a rising number of rivals in that space, while its Windows Mobile heartland contracts.

Samsung expects operating profit to come in between KRW3.5 trillion and KRW3.9 trillion ($3.45bn), compared with an operating loss of KRW740bn a year earlier, with consolidated sales between KRW38 trillion and KRW40 trillion, up from KRW33 trillion.

Cellphones are expected to be the most important driver of the strong performance.
Motorola, despite being snubbed in favour of HTC for the Nexus One, is still making an Android splash at the CES show, joining AT&T’s line-up and unveiling the Backflip. It also announced that its Android phones would be the first to integrate Flash, something developers have been awaiting for over a year.

Motorola has worked with Adobe, under the auspices of the latter’s Open Screen Project, to develop Flash Player 10.1 for the Google OS. Integration of Flash browser extensions in Motorola’s Android devices is expected in the first half of 2010, and there will be updates for existing devices like the Verizon Droid. Flash is increasingly central to the web experience, and one of the areas where Android can differentiate itself from the iPhone, which has so far rejected any native Flash implementation.

The Backflip will be available in North America, Latin America, Europe and Asia during the first quarter. It features a ‘reverse clamshell’ design – the phone opens to reveal a hard Qwerty keyboard with a trackpad on the back side, so users can use the touchscreen without getting their fingers in the way. The phone runs Motorola’s own Motoblur user interface.

Amid all the Android furore, Palm still managed to make some noise at the event where it debuted its Pre and webOS a year ago. It confirmed its carrier deal with Verizon Wireless, for Pre and its smaller stablemate Pixi, and updated the products for its new partner. Verizon Wireless will offer the new Pre Plus from January 25. The main differences from the Pre, offered exclusively in the US by Sprint, will be the removal of the physical button on the face and the doubling of embedded memory to 16Gb. The main new feature of ‘Pixi Plus’ will be the addition of WiFi. No pricing yet. Palm also announced an agreement with AT&T for two devices, and some updates to webOS, including imminent support for Adobe Flash 10.

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