Apple Sends Samsung Into Full Crisis Mode

12/2/13 10:20AM EST

Apple Sends Samsung Into Full Crisis Mode Apple Sends Samsung Into Full Crisis Mode

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Samsung is not happy with its progress in 2013. The company ended 2012 on a high note, but it has failed to capitalize on that momentum. Apple Inc. (NASDAQ:AAPL) still stands. The company is as strong as it has been at any time in 2013. Samsung has failed to kill the giant, and the company is running out of options.

Samsung has, according to reports, called a “Crisis Awareness” meeting. The meeting, which will include hundreds of the company’s top managers, will address the company’s current stance, and its plans for the months ahead. The South-Korean company has poured a huge amount of money into smart phone development. If it can’t win the market, it may end up overheating.

Apple Smartphone Dominance

Apple Inc. (NASDAQ:AAPL) is no longer the biggest smart phone seller in the world, and the company’s phone is not considered the only player at the top of the market any more. The iPhone has had its day, but that doesn’t mean Samsung is going to take charge. That company will likely face more problems as it tries to settle into second place.

Apple still takes the biggest chunk of profit from the smart phone market, but Samsung isn’t all that far behind. The two companies bring in more than half of the total profit in the market between them. Samsung bet a huge amount of Research and Development and marketing money on becoming the biggest player in the market in 2013. That hasn’t happened and points to a very expensive 2014 on the way.

At the same time Samsung is being faced by the same problem that Apple Inc. (NASDAQ:AAPL) is. The smart phone market is going to see a significant contraction in margins in the years ahead. Samsung is already exposed to more of that margin decline than Apple, because of its reliance on many different smart phone price levels for its revenue.

Samsung Crisis Management

The report about the Samsung crisis, which was picked up by Apple Insider, cited Oh Jung-suk, associate professor at the business school of Seoul National University. He pointed to Samsung’s massive marketing spend, and the focus of that spend, as reasons for the company’s troubles. Samsung spends around 5.4 percent of its annual revenue on marketing, more than any other of the world’s twenty largest companies. Apple Inc. (NASDAQ:AAPL) spends just 0.6 percent of its annual revenue on marketing.

Samsung has realigned its business behind the booming smart phone market. The market is becoming saturated in North America and much of Europe, while margins in the rest of the world are far from the same levels. At the same time the Korean company has thrown a massive amount of money into marketing and research. None of that investment has resulted in dominance, and the hey-day of the market is over.

Samsung is in crisis. Apple Inc. (NASDAQ:AAPL) proved unmovable at the top of the smart phone market. Apple Inc. (NASDAQ:AAPL) is far from safe from the slow down in smart phones, but it is not in crisis. Samsung needs a major shift in order to continue operating at the same level. Samsung is in crisis, and Apple Inc. (NASDAQ:AAPL) is probably not surprised.

Disclosure: Author represents that he has no position in any stocks mentioned in this article at the time this article was submitted.