Tip of the Hat: Samsung's warning should be no surprise

Competing on price has served Samsung well, but Ben Thompson says only Apple has the right long-term smartphone strategy

Samsung blamed this week's projection that third quarter profits will fall below last year's levels on a slowdown in the smartphone business and increased competition in China and Europe.

Tip of the hat

Several analysts quickly noted that Samsung's warning for the quarter -- which would be the third straight that the company has seen profits fall -- can be traced to the company's inability to differentiate its products from an ever growing list of rivals.

That key problem, contends Ben Thompson in a blog post on his Stratechery website, is similar to that facing providers of Windows-based PCs -- "the hardware maker with its own operating system that is dominating profits, while everyone else eats themselves alive to the benefit of their software master."

Computerworld offers a Tip of the Hat to Thompson for his analysis of the smartphone business, and why companies like Samsung that compete on price are likely to struggle, while Apple, with its proprietary software, will flourish by offering "software-based differentiation" on its devices.

Thompson notes that Apple's strategy of using a proprietary OS that only runs on its devices was once widely expected to kill the company. But it has proven through the years with its computers, laptops and mobile devices that the strategy is the key to its success, and will likely continue to be.

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