Android Phones Outselling iPhones, But . . .

In my previous post on Samsung and Motorola, I observed that the two companies, which have launched many devices based on the Android operating system (OS), are gaining share in the smartphone market. Let’s take a look at their recent performances.

Samsung Electronics (005930.KS) recently reported second quarter revenue of 37.89 trillion Korean won ($32.1 billion), up 17%. Net income was 4.28 trillion won ($3.62 billion) and operating profit increased 88% to 5.01 trillion won ($4.2 billion), topping the previous high of 4.41 trillion won ($3.7 billion) in Q1. Samsung ended the quarter with 20.43 trillion Korean won ($17.3 billion) in cash. Q1 coverage is available here.

The increased profitability was driven by the company’s semiconductor business, which grew 55% to 9.5 trillion won ($8.02 billion), and a profit margin of 30.8% driven by the Memory Division, which posted a 74% increase in sales. Strong demand in the DRAM market was driven by a mid-20% increase in PC shipments and a more than 30% rise in gigabytes per system. In NAND, despite weak seasonality, demand remained steady owing to strong sales of mobile devices, including smartphones and tablet PCs. The demand for DRAM is expected to rise in Q3 owing to strong seasonality and increased demand for high-capacity NAND products.

Samsung’s LCD business grew 31%, while the Digital Media business grew 20%. Its Telecommunication business grew 4% to 9.18 trillion won ($7.75 billion) with the Mobile business accounting for sales of 8.45 trillion won ($7.14 billion), up 5% on shipments of 63.8 million handsets, itself up 22%. However, increased competition led to a slight decline in the average sales price. Touchscreen mobile handsets made up 30% of Samsung’s unit sales during the quarter, compared with 15% a year ago. In the third quarter, Samsung aims to increase its market share through flagship devices including the Galaxy S and Wave. The Android-powered Galaxy S has been selected by more than one hundred carriers around the world, including four major service providers in the United States. Samsung also plans to launch a range of mid-end smartphones.

Motorola (NYSE:MOT) recently reported strong second quarter results that beat analyst estimates. Revenue was $5.4 billion, down 1.5% and net income was $162 million or $0.07 per share versus $26 million or $0.01 per share last year. The company ended the quarter with total cash of $8.3 billion after compeleting a $500 million debt tender offer. Q1 coverage is available here.

During the quarter, the company shipped 8.3 million handsets, including 2.7 million smartphones. Mobile Devices segment sales were $1.7 billion, down 6%, while Motorola swung to GAAP operating profit of $87 million from a loss of $287 million last year. In the quarter, the company launched Droid X, a pocket-sized home theater smartphone with a 4.3-inch high-resolution display and powerful 1 GHz processor. The Droid X, which received positive reviews, could undermine sales of Droid 2, released last week. Motorola also introduced i1, the world’s first push-to-talk Android-powered smartphone, as well as smartphones Flipout and Charm, which brings the number of smartphones in Motorola’s portfolio to twelve.

Most of Motorola’s profits came from its public-safety radio and handheld scanner business and from its network equipment unit. It recently announced the sale of the majority of its Networks assets to Nokia Siemens Networks. Enterprise Mobility revenue was $1.9 billion, up 10%, Network revenue was $967 million, down 2%, and Home segment revenue was $886 million, down 13%.

For the third quarter, Motorola expects earnings of $0.10 to $0.12 per share. The cellphone unit is expected to return to sales growth in the third quarter for the first time in nearly four years and to return to profitability in the fourth quarter. Its stock is trading around $8 with market cap of about $19 billion. It hit a 52-week high of $9.23 on September 15 of last year.

Android continues to be a huge growth factor for both Motorola and Samsung as well as the smartphone market in general. Motorola has swung to profit since it switched to Android, and Samsung has made its entry into the top five smartphone vendor list, replacing Motorola. Another top five vendor, HTC, saw its revenue increase 66% in the recent quarter driven by the Andoid OS. According to IDC, Apple now holds 13.3% of the market, up from 12.4% last year. But HTC and Samsung posted better share gains with 7.6% and 4.8% versus last year’s gains of 5% and 2.6%, respectively. Nokia and RIM were the losers with 38.1% and 17.8% gains, respectively. RIM recently launched a new model and a new OS, which Walt Mossberg of WSJ.com calls a good product that improves the BlackBerry experience considerably and brings it closer to its newer rivals.

Kevin C. Tofel on GigaOM reports that Android phones have outsold iPhones in the United States for the first time. Android OS is a winner. But the iPhone is expected soon on Verizon, which should squash the Android threat as iPhone sales estimates touch 12 million units.