Samsung Tizen – Policy expired.

Reply to this post

Tizen is an expensive and expired insurance policy.

• Samsung has announced that it will continue its Tizen program at a variety of price points even though the Z1 appears to have only shipped around 1m units in India.
• Tizen is an open source platform, which is effectively controlled by Samsung as it writes all the code.
• Samsung uses it to make TVs, smartphones and smart watches.
• 18 months ago, Tizen made some sense as Samsung was actively engaging in developing its own ecosystem and Tizen represented its fall-back position.
• Samsung was going head to head with Google which meant that a Samsung ecosystem on Android could have become unworkable.
• Hence, Tizen was the fall-back position for Samsung’s ecosystem should things have fallen through with Google.
• However, Samsung abandoned all of its ecosystem efforts in January 2014 and now competes in smartphones using hardware only.
• This is evident in the Samsung Galaxy s6 which has many individual hardware features but is a standard Google ecosystem device when it comes to software.
• Consequently, as Samsung is no longer competing at the ecosystem level, there is no point in having this fall back position.
• I also believe that the cross-device argument has no merit.
• Cross device is a strategy where a device maker aims to encourage users to purchase a range of devices based on their ability to seamlessly work together.
• Apple is a good example of this where its iPhone, iMac and Apple TV all try and work together to provide an enhanced experience.
• Samsung has an opportunity to do the same given the range of consumer devices that it sells but there is a big problem.
• RFM research clearly indicates that the user primarily makes an ecosystem choice based on his experience on the smartphone.
• Almost every smartphone made by Samsung is based on Android meaning that it must make its Android smartphones work seamlessly with its other devices for this strategy to work.
• Consequently, a Tizen smartphone makes no sense as it has no ecosystem, or apps and few users are likely to buy it.
• Samsung will be better off ensuring its Android smartphones work well its other devices than fiddling around with Tizen.
• For TVs and other dedicated function devices, a case can be made for Tizen, but these also come with their own sets of limitations.
• Times are now much tougher for Samsung, and this is a drag on the profit and loss account that it simply does not need.
• That being said, cutting Tizen is unlikely to make a huge difference and I continue to see handset margins hovering around the 10% level.
• Samsung is once again a component company as it is Device Solutions division (Memory, System LSI and Panels) that is now the engine of profit growth.
• The negative impact of handsets is still lingering and hence growth looks pretty anaemic for 2015E.
• This, combined with question marks around how popular the s6 has really been, leaves me with no reason to get involved with the shares.
• I prefer Microsoft or Google.