How Long Will Samsung Reign?

Samsung recently became the leading vendor of smartphones with a market share of 20%, up from 8.8% last year, according to a third-quarter market research report by IDC. It surpassed Apple, which has a 14.5% market share, down from 17% last year. Let’s take a closer look.

Samsung Electronics (005930.KS), with annual revenue of 154.63 trillion Korean won ($134.5 billion), recently reported third quarter revenue of 41.27 trillion won ($35.8 billion), up 3% y-o-y. Net income was down 23% y-o-y to 3.44 trillion won ($3 billion).

Semiconductor segment sales decreased 11% owing to a 27% decline in Memory sales. Display Panel business sales declined 13%, and the Digital Media & Appliances businesses declined 0.4%.

Telecom drove revenue growth in the quarter. Telecom revenue increased 37% in the quarter driven by strong demand for Samsung’s GALAXY smartphones. Handset shipments increased more than 20% q-o-q, driven by 40% q-o-q and 300% y-o-y growth in the smartphone segment. Samsung’s flagship GALAXY SII smartphone has now sold more than 10 million units in the five months since its introduction.

Lance Whitney on CNET News reports that Samsung earned the top spot with a record 23.6 million shipments for the third quarter, surpassing the 20 million mark for the first time in its history and showing a huge gain from the 7.3 million units shipped a year ago.

Analysts believe customers delayed purchases in anticipation of Apple’s iPhone 4S led to Apple recording just 17 million iPhone shipments, lower than the previous quarter’s 20 million. Apple’s loss proved to be Samsung’s gain: Samsung’s new GALAXY SII smartphone, released in the summer, was a major success, and in the absence of stiff competition from the iPhone, it reaped huge benefits. But will Samsung be able to hold on to the top position for long? With Apple iPhone 4S selling more than 4 million units in the opening weekend of its launch and Nokia also launching its Windows phones, the next quarter could see a fiercely fought battle for the top spot.

The struggle for the top spot also unfolds in courts all over the world. Samsung and Apple have sued and countersued each other in at least 30 lawsuits across continents. In August 2o1o, Apple won a preliminary injunction to ban the sale of Samsung’s GALAXY Tab in most of Europe. A few months later, in December, Samsung failed to block Apple from selling its newest smartphone iPhone 4S in France. But Samsung managed to overturn a ban on its tablets in Australia just before the critical Christmas season.

Meanwhile, Motorola Mobility also won a German patent ruling against Apple that may be used to block iPad and iPhone sales. Apple is going to appeal the ruling, and Motorola Mobility will have to post bond of 100 million euros to enforce it. Although it seems unlikely that the ruling will be enforced, it demonstrates the strength of Motorola Mobility’s patent suite and underscores the reason for Google’s $12.5 billion acquisition of Motorola Mobility, which currently holds around 17,000 patents, with another 7,500 patents pending approval. Google expects to get the go ahead for acquisition in early 2012 after it gets antitrust clearances in the U.S., European Community, Canada, China, Israel, Russia, Taiwan, and Turkey. Google recently said that the Motorola Mobility arm will be treated as a third-party smartphone maker rather being made a subsidiary of the search giant’s larger company.

Motorola Mobility (NYSE:MMI) recently reported third quarter revenue of $3.3 billion, up 11%. Net loss was $32 million or $0.11 per share compared to net loss of $34 million or $0.12 per share last year and a loss of $56 million or $0.19 per share last quarter. Motorola Mobility ended the quarter with $3.3 billion in cash. Annual revenue in 2010 was $11.5 billion.

Home segment net revenue in the fourth quarter was $825 million, down 10%, and GAAP operating earnings were $54 million, compared to $49 million last year. Set-top box shipments were down 3%.

Mobile Devices segment net revenue was $2.4 billion, up 20%, while GAAP operating loss was $41 million, compared to loss of $43 million last year. During the quarter, Motorola Mobility shipped 11.6 million handsets, including 4.8 million smartphones, and about 100,000 Motorola XOOM tablets. In the third quarter of 2010, the company shipped 9.1 million mobile devices, including 3.8 million smartphones. During the quarter, Motorola Mobility shipped the DROID BIONIC for Verizon and introduced the Motorola DROID RAZR. Its stock is trading around $39 with market cap of about $11.6 billion. The 52-week range is $20.77 to $39.20.