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A huge drop in Samsung’s devices badly hurts the mobile phone maker

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August 31, 2015

A huge drop in the overall demand for Samsung’s newest Galaxy smartphones triggered a 5th straight monthly decline for the phone maker, wiping out about $44 billion in market value on its stock since April of this year.

By any measure, this is a substantial drop, even for an Asian company the size of Samsung.

Samsung dropped by almost $12 billion in its valuation in August alone as the South Korean company surrendered a large share of its market to Apple and various Chinese rivals that offer a lower price point.

And Samsung’s corporate decision to advance the release of its new Galaxy smartphones failed to dispel pessimism about its second-half earnings.

Apple is largely expected to take the wraps off its new iPhone on Sep. 9 and release it in time for the crucial end-of-year holiday shopping season.

“We all know Samsung's smartphone business isn’t doing well,” said Lee Seung Woo, an analyst at IBK Securities in Seoul. “This is no secret to anybody,” he added.

Samsung’s global smartphone market share fell more than 3 percentage points in the second quarter, and it no longer is the top seller in China, the world’s biggest mobile-phone market.

It is being undercut at the high end by Apple’s larger iPhones and at the mid-range and low end of the market by devices from Xiaomi, Lenovo and Huawei.

It looks like Samsung totally misread the overall demand for its S6 models released in April, failing to produce enough three-sided screens for the Edge while the regular version struggled against the iPhone.

One of its latest models, the Galaxy Note 5, was criticized by reviewers and mobile users this month after the company acknowledged that the device can break if the stylus is inserted backwards into the storage slot.

The next 2 to 3 quarters will obviously be extremely critical to the overall profitability of Samsung. Yes it's a big electronics producer of a lot of products, but it's still vulnerable in a way with the likes of Apple and other important competitors.

In other mobile news

Verizon CFO Fran Shammo, while speaking at a Wall Street Journal conference Monday, made it very clear that the company has no intention of acquiring Dish Networks.

Shammo also added that Verizon will keep media assets like the Huffington Post and Tech Crunch, which the company acquired in its $4.4 billion acquisition of AOL, but he was very clear about his company's intentions when it comes to Dish-- Niet!

Overall, multiple reports have surfaced in the past few weeks that Dish is crafting a deal to acquire T-Mobile.

Just last week, the Wall Street Journal reported that Dish and T-Mobile are looking at a deal that would still leave T-Mobile parent company Deutsche Telekom with a large minority stake in the new company, and that Dish is already talking to banks to secure funding for a $15 billion offer as well.

And yet some have questioned whether Verizon might be interested in acquiring Dish for its massive inventory of wireless spectrum.

Shammo denied that Verizon has any interested in Dish's spectrum, telling the Journal that if Verizon had wanted more spectrum it could have easily acquired it at auction.

This wouldn't be the first time Shammo has put to rest claims that Verizon would go to any length for more wireless spectrum.

Speaking at an investor conference back in March, Shammo said that in the past, spectrum cost less than it did to add capacity using technology.

“This spectrum auction flipped that balance on its head. We can build additional capacity for a third of what this spectrum is going to cost,” Shammo said at the time, noting that the FCC’s bidding rules need to be revised to account for companies like Dish, which took home huge amounts of wireless spectrum at a discount while driving up prices for others.

In other mobile news

In a way, Apple is really hoping that time will repeat itself with its new Watch the way the iPhone did when it first came out.

While its original iPhone turned heads when it first debuted in 2007, it didn't become a world-beating smartphone until 2008, when Apple launched its App Store and made it very simple for anyone to download apps and programs on their iPhones.

Steve Jobs' venerable iPhone went from a slick-looking smartphone that could make calls, play music and videos, and browse the Web to a device that could do virtually anything developers could imagine.

Now Apple has the same ambitions that a radical transformation will occur with its Apple Watch, which will get access to native applications that can fully take advantage of the wearable device and its numerous capabilities with the next version of its Watch OS software.

"For us, this is a huge moment," said Apple CEO Tim Cook during the company's annual developer conference on Monday. "This is how we felt when we launched the App Store in 2008."

By empowering app developers to create more robust applications, Apple is creating the foundation for making the Watch more than just a simple, traditional watch.

One of the early knocks on Apple Watch is that it hasn't been able to do anything useful enough to justify the cost-- it typically ranges between $349 and up to a staggering $17,000.

But like the App Store transformed the iPhone, the rise of native apps on the new Watch could really foster the next killer app-- something innovative and useful that will have you running out to buy the wearable device.

"Opening up native apps and access to the Watch hardware and software features to developers will make a huge difference," said Jan Dawson, an analyst at Jackdaw Research.

"Third-party apps are key to mainstream adoption of the Apple Watch and what Apple announced this week will finally make really compelling third-party apps possible," he added.

And Apple Watch's success could also have ripple effects on the broader market as well. While a a whole slew of technology companies ranging from Samsung to LG have barged into the wearables, few have really taken off.

Google's platform for wearables (Android Wear) has struggled since its very launch, with market research firm Canalys reporting vendors collectively shipped only 720,000 units last year out of a total 4.6 million wearables.

For its part, Motorola's Moto 360 is widely believed to be at the top of the Android pack, at least for now.

Several wireless industry analysts believe that Apple's smartwatch will change things around. Forrester Research also expects Apple to sell more smartwatches this year than any of its rivals have cumulatively sold, including fitness companies like Fitbit.

Meanwhile, Apple Watch could provide a lift in awareness and interest that could drive sales for the rest of the category.

Market researcher Strategy Analytics forecast in March that Apple will ship about 15.4 million Apple Watch units this year, giving the company about 54.8 percent of the global smartwatch market.

All other smartwatch makers combined will ship just 12.7 million units in 2015, according to the forecast.

Strategy Analytics believes the Apple Watch will ignite the wearables segment, saying that total worldwide smartwatch shipments will jump 511 percent, from 4.6 million in 2014 to 28.1 million this year.

In other mobile news

The U.S. Competitive Carriers Association (CCA), which represents smaller regional and rural wireless carriers, is petitioning the Copyright Office to support the legal unlocking of mobile devices.

The idea was originally planned in January but it only was finally approved in mid-April.

The issue is near and dear to the hearts of CCA's carrier members, as customers looking to leave the larger mobile carriers often need to have their devices unlocked in order to switch to another provider.

The CCA said it strongly supports an exemption that would allow U.S. consumers to unlock all of their devices that connect to a wireless network.

"Because this proceeding is forward-looking, an exemption should allow consumers the ability to unlock any relevant wireless device, and not be subservient to the will of any single mobile carrier or manufacturer," wrote Michael Lazarus, managing member of Telecommunications Law Professionals PLLC on behalf of the CCA.

"Additionally, and as directed by Congress, the exemption should not limit who may provide assistance to unlock a wireless device, and therefore should allow an agent of the consumer, whether it be another person or a wireless provider, to perform the unlocking procedure, just as a locksmith may unlock an individual’s car or home when they do not have the necessary key.”

In January of 2013, the Copyright Office had made unlocking a cell phone illegal in some circumstances. The decision was taken to help reduce large-scale phone trafficking but left a chance that consumers could still face some penalties for unlocking their devices.

The fines could range from a minimum of $2,500 to $25,000, and up to five years in federal jail.

At the time, more than 100,000 consumers signed a petition imploring President Barack Obama to make unlocking legal again. The FCC agreed to investigate the matter further, and in July of last year Congress unanimously approved a new bill that made it legal to unlock phones.

The Copyright Office is in the process of reviewing its present rules and could move to revise those rules soon.

In a statement, CCA President Steven Berry said that the decision to extend the unlocking exemption should be an easy one for the Copyright Office.

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Source: W.S.G. News.

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