Will Apple Scare Samsung Out of the Smartphone Business?

  on April 08 2013 10:50 AM

Samsung (SSNLF.PK) is in crisis mode, or at least it should be, according to chairman Lee Kun-hee, and could be looking at a major shakeup and directional change in the coming months.

Troubled by ongoing litigation with Apple (NASDAQ:AAPL), Lee may seek to cut Samsung’s “reliance on its mobile business,” according to a Korea Times report citing company insiders. Lee just returned from a three-month trip to Japan and Hawaii, and has a history of taking lengthy trips overseas only to return to Samsung with ideas for major changes, including new directions for the business and managerial shakeups.

Lee met with reporters at Gimpo International Airport upon returning from his travels. It was there that he said Samsung should “always have a sense of crisis,” and strive to “run faster and always study to have insights.” Lee plans to meet with reporters again on Wednesday, when it is suspected he will announce major changes to be implemented.

But just what those changes could be is unclear — a shift in focus would be foolish if it meant neglecting the company’s smartphone business. Samsung recently reported profits were up 53 percent year-over-year in the first three months of 2013, with $7.7 billion. Sales in the quarter were believed to have been primarily driven by low- and mid-level smartphones. Furthermore, Samsung just released the Galaxy S4, sales for which were not included in the quarterly report.

Though patent litigation with Apple has been costly, clearly it hasn’t prevented the company from continuing to squeeze massive profits out of the already saturated smartphone market. However, Samsung has been ruled to be infringing on various Apple patents in multiple markets, in some cases forcing it to remove products from shelves and/or pay Apple a share of profits. Any new direction for the company might seek to prevent or at least reduce such patent litigation going forward. What could be Lee’s solution, though, remains as of yet unclear.

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