Report: Samsung's Android market dominance fuels Google anxiety

Tools

Samsung Electronics' dominant position within the Android mobile device ecosystem is a mounting source of concern for Google (NASDAQ:GOOG), which fears the manufacturer may flex its muscle to renegotiate the terms of its Android licensing agreement and demand a larger share of mobile revenues.

Samsung leads both worldwide smartphone sales and overall mobile phone sales, according to research firm Gartner. The vendor sold 384.6 million phones last year, with smartphones accounting for 53.5 percent of that total, and ended 2012 controlling 22 percent of worldwide mobile sales, ahead of Nokia (NYSE:NOK) at 19.1 percent and Apple (NASDAQ:AAPL) at 7.5 percent. Samsung's closest Android rival, ZTE, follows at 3.9 percent. "With Samsung commanding over 42.5 percent of the Android market globally, the Android brand is being overshadowed by Samsung's brand, with the Galaxy name nearly a synonym for Android phones in consumers' mind share," said Anshul Gupta, Gartner principal research analyst.

The Wall Street Journal reports that disparity is a major topic of meetings between Google and other Android manufacturing partners taking place at this week's Mobile World Congress conference in Barcelona. Sources say Google is hopeful that new Android devices from manufacturers like HTC and Hewlett-Packard can provide legitimate competition to Samsung's product line.

Insiders add that during a Google executive meeting last fall, Android chief Andy Rubin praised Samsung's success and credited the number of Samsung devices in the market for boosting Google's mobile advertising profits. But Rubin also told colleagues that Google acquired device maker Motorola Mobility as a kind of insurance policy against Samsung or any other manufacturer gaining too much power over Android's future growth.

Several people familiar with the relationship between the two firms add that Google fears that Samsung will demand a greater share of revenues from Google mobile advertising and search services preloaded on the manufacturer's devices. Sources state that Samsung has previously received more than 10 percent of Google's mobile revenues but has already signaled to Google that it may demand more as apps like Google Maps and YouTube become more profitable. Google last fall said its mobile services are on pace to rake in $8 billion per year. 

Representatives for Google and Samsung declined to comment.

"There is a threat from Samsung to Google that is real," Rajeev Chand, managing director at investment bank Rutberg & Co., told The Wall Street Journal. "Over time, Samsung will be able to leverage its market share dominance to negotiate better terms from Google." Those terms could include access to "better versions of Android software before other manufacturers," Chand said, as well as the latitude to preinstall more applications from Samsung and its partners onto Android devices.

For more:
- read this Wall Street Journal article

Related articles:
Gartner: Samsung's sales dominance overshadowing Android brand
Canalys: Android powers one-third of all phones shipped in Q4
Android, iOS power record-high 92 percent of smartphone shipments in Q4
Google's Schmidt: Android winning the mobile war against Apple
IDC: Apple must offer low-cost phones to keep pace with Android

Comments