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Samsung tries to beat Apple at the smartwatch race

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September 5, 2013

With the launch of the new Galaxy Gear smartwatch, Samsung is telling the world that it's done being a follower. Of course, whether the market will agree or not is still unclear at this time, but the Korean electronics giant still wants to make a strong point about its new plans.

And it's got a lot of observers watching closely. Samsung has had a bit of the 'Napoleon complex' lately when it comes to mobile devices, especially in the field of 'wearables'.

Like it or not, Samsung is still the world's biggest mobile handset vendor, and it looks like it will remain in that number one position for at least another year or two. However, Samsung is forever compared to Apple and often found to be lacking in one way or the other.

Either it's the flimsy feel of its devices or the hard-knocks lesson that its features, like eye scrolling, don't always run as smoothly as expected. Most of all, it's the perception that Samsung is a me-too company, creating devices already perfected by Apple, and that doesn't always bode well for some.

But it's so-called 'Gear' represents Samsung's chance to break with the view that it's simply a fast follower. No, Samsung isn't the first company to release a smartwatch, and Gear isn't its first attempt in that market either. But of all the smartwatch makers out there, Samsung is the only one with a large user base, marketing resources, and brand awareness to actually gain some traction.

Some say that 'Gear' is Samsung's opportunity to show that it can make something innovative and establish itself as a leader early on. In that, it seems to have succeeded in a certain way. This time around, it's Apple playing catch-up, or so it would seem.

Apple has hinted many times at future device categories, but it's uncertain when it may launch a wearable or what the product exactly will do.

Some market observers have speculated about an iWatch release either later this year or next. In the meantime, Samsung will face a bevy of rivals already in the market.

And that rapidly growing list includes Sony, Pebble, and Martian, and chipmaker Qualcomm launched its own smartwatch just yesterday, in case you didn't take note. Even if those don't have high sales numbers, they have been generating plenty of buzz, and that's what all those market players need to get traction.

But whether Samsung will be able to generate sizable sales of its own is a big question mark. Gear at first will be limited to buyers of the company's Galaxy Note 3 phablet, something that will sharply lower the number of potential users. It will soon be compatible with other devices, but those too will be limited to Samsung's other high-end products like its Galaxy S and Note lines.

While Gear could help Samsung attract new customers and build its ecosystem, the company has nothing close to Apple's hold over its consumers. It's also questionable whether Gear's features will attract a mass audience or whether they'll only appeal to a small group of early adopters, and that's another thing to worry about for Samsung.

Then again, nothing is ever as it seems anyway. "At the end of the day, consumer attitude is critical," said Juniper Research analyst Nitin Bhas. "Not every human being has the same level of technology comprehension as Apple and Samsung afficionados. Smartwatches are going to be a great market, but compared to smartphones or tablets, they're going to continue to be a niche market."

At first, Gear will work only with the Galaxy Note 3 phablet, but it's widely expected that Samsung will soon expand that quite rapidly.

Juniper estimates that app-enabled smartwatch shipments will total only about 1 million in 2013 but could jump to 36 million by 2018. The estimate assumes essentially that all future volume will come from Samsung and Apple, Bhas noted. Other firms peg the total wearable market at about 75 million units in 2017, which makes it much smaller than mobile devices but still an attractive area for electronics makers.

Smartphone shipments, meanwhile, should reach 1.7 billion units in 2017, according to IDC. Samsung unveiled Gear yesterday during a splashy event at the IFA consumer electronics show in Berlin and at a simultaneous broadcast in New York.

The $299 smartwatch will be available in the U.S. in October. It sports a 1.63-inch super AMOLED screen surrounded by a metal frame and includes a 1.9-megapixel camera embedded into the rubberized band. Gear runs Android and syncs with Galaxy smartphones and tablets, allowing users to do things like control their music or check messages without touching their mobile devices.

While Gear initially only works with the Note 3 phablet, it soon will extend to the Galaxy S4 and Note 2. The initial version of Gear is unlikely to be a complete game changer, partly because of its limitations out of the gate. But in Samsung's mind, blockbuster sales for the first iteration of Gear may not be crucial.

Once the company targets a market, it throws all of its efforts behind that push, introducing more and more versions of a device until one takes off. Samsung followed the same strategy with the Galaxy S line, and that focus allowed it to dominate the smartphone market by the time the third and fourth generations came out.

Samsung views wearables as a key growth area going forward, so there's no doubt that it's already working on future designs, including models with flexible displays.

Samsung itself acknowledges that Gear will likely be a small market at first. JK Shin, Samsung co-CEO and head of the company's mobile business, believes Samsung may sell two or three watches for every 10 Galaxy Note 3 devices, according to The Wall Street Journal.

Dong-hoon Chang, Samsung's head designer, recently said that in the near term, smartwatches will only be accessories for smartphones, something that will limit their uptake to a certain degree.

"You never know what's going to happen in the future," Chang said. "For the time being, of course, it will not be as big as the smartphone market, but maybe in the coming two to three years, it will become quite sizable."

Even with Gear's initial hurdles and limited scope, Samsung at the very least has shown it can create something innovative without looking to Apple as a model.

It has set the new bar to meet in wearables, and it's up to Apple to make the next move. Samsung sure won't be sitting still, and it made that point very clear to all that were in the room.

In other mobile news

Microsoft's acquisition of Nokia's phone division, which outgoing CEO Steve Ballmer has since described as a way for the company to accelerate in the right direction, appears to be an attempt to add another weapon to its anti-Google tool chest, but the question is, will it work?

Ballmer was quoted as saying-- "By the early part of this year, it was clear to me that perhaps an acquisition would be a way to accelerate ourselves. I called Nokia board of directors chairman Risto Siilasmaa and we met at Mobile World Congress."

Microsoft could be playing a strategic marketing war with Google squarely in its sights, some wireless industry observers are now saying.

The software giant is paying about $7 billion in cash for the once-mighty Finnish mobile phone company's Devices and Services business, and for the licensing of Nokia’s patents.

Since Google has become the force it is today, no one has beaten it at anything significant yet, and now Microsoft is willing to give it a shot.

At the same time, we have Microsoft announcing CEO Steve Ballmer's departure from his position within the next 12 months, this at a time when ultra-committed leadership is required.

Not only that, but Microsoft's board has just caved in to a tenacious activist investor, ValueAct Capital, which holds just 0.8 percent of Microsoft's stock and potentially giving it board-level representation.

Companies like Dell, Emulex, Quantum, and others twist and turn and fight prolonged battles against activist investors. Why has Microsoft's board behaved this way? That's another of several questions which still remain unanswered.

Ex-Microsoft executive Stephen Elop was Nokia's CEO before the acquisition. With Nokia about to join Microsoft's Windows Phone business, he becomes Nokia executive vice president of devices and services until the transaction closes for good.

Elop is expected to run Microsoft's new devices and studios business unit. The expanded division, which up until now was responsible for Surface tablets and entertainment, which includes games, music, video and other entertainment, will now fold in phones as well.

Elop talked about bringing together "the best of Microsoft’s software engineering with the best of Nokia’s product engineering, award-winning design, and global sales, marketing and manufacturing".

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The Nokia exec added-- "With this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products."

The Nokia phone business acquisition is probably Ballmer's swan song. Having achieved that, he can cut loose with satisfaction. The big unknown is who will be Microsoft's next CEO. That person will have to pick up the reins of Ballmer's cavalry, preparing to challenge Google head on.

And what about Apple? What will happen to it next? It's a secondary target, if anything, at least according to some. Vulture South points to a Microsoft presentation identifying both Apple and Google. But our opinion is that Google is a bigger threat to Microsoft than Apple is.

Google is going after Microsoft's software products and services cash cow-– the part it really values, whereas Apple isn't interested in any of that, unless it's to sell more iPhones and iPads.

Traditionally, Microsoft has been at its most focused, directed and effective going up against single enemies-- witness the fate of Netscape, Lotus, Novell and others.

So it's going against Google first, and fighting a marketing war on one main front. Can it succeed in taking on Google with a CEO who is waiting on his successor?

All of the Microsoft smart mobile device and services weaponry appears to be aimed at the Google target, apparently with Elop's finger on the trigger, with an outgoing CEO to guide him.

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Source: Samsung.

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