Samsung Delays KNOX; Ties Knot with Best Buy

By Stephanie Blanchard, Digital Editor — April 29, 2013

While Apple talked business, which caused Street squawkers to sound the alarm unnecessarily, Samsung announced its own Q1 earnings. Although smartphone competition is still expected to intensify this year, the company’s profits are up 42%.

The flagship Galaxy S4, unveiled in March, was well received by carriers, Samsung said. The company therefore expects the new Android-based device, to outperform its predecessor — the Galaxy S3. The S4 became available in most carriers this week after a slight delay.

In addition to the unexpected wait, Samsung issued a statement that said: "Due to overwhelming global demand of Galaxy S4, the initial supply may be limited. We expect to fulfill inventory to meet demands in the coming weeks."

According to Strategy Analytics, Samsung now accounts for one-third of all smartphones worldwide, surpassing Apple. “Samsung grew 56% annually and shipped a record 69.4 million smartphones worldwide, capturing an all-time-high 33% market share in Q1 2013,” said Neil Mawston, Executive Director, Strategy Analytics.

Not only did Samsung ship almost twice as many smartphones as Apple, he noted, but grew nine times faster during the quarter. (Apple shipped 37.4 million iPhones worldwide in Q1 2013.) Although volume was up from 35.1 million a year earlier, Apple grew a modest 7% annually during Q1 2013 - the iPhone’s lowest growth rate ever in its history.

“With the flagship Galaxy S4 model likely to be in high demand, provided there are no major component shortages, Samsung should continue to deliver strong smartphone volumes worldwide in the second quarter of the year,” he said.

Knox Out
Samsung’s Galaxy S4, however, is going to be missing a key component, and highly promoted solution for BYOD — Knox — but that might not matter to prosumers who are largely responsible for moving Galaxy devices into the enterprise in the first place.

The security suite was originally intended to launch for the first time with the new smartphone, so that enterprises would more readily accept the Android-based device. However, the software won’t be fully available, possibly until summer.

According to a statement released by the company, “All the Knox framework components come standard on the device, with full-feature activation by solution providers and distribution channels to become available at a later date.”

Knox was designed as an addition to Samsung Approved for the Enterprise (SAFE), which works with Microsoft ActiveSync and offers encryption and VPN capability. Companies like Homecare Homebase rely on SAFE to control and lockdown devices it provides to its mobile workforce. Knox is supposed to take it all a step further, with security hardening from hardware to application layer.

With its delay, will it matter?

“Knox is not a consumer issue so it shouldn’t impact sales,” said Stephen Baker, vice president for industry analysis, NPD Group, in an interview with Mobile Enterprise. “BlackBerry is, I believe the only other product that can offer the same type of smartphone security right now. So Samsung has plenty of headroom whether Knox comes out in April or August.”

Neil Shah, Senior Analyst, Strategy Analytics, agreed. “The Samsung Knox delay won’t affect Galaxy S4 sales, as there is a lot of pent up demand for the Samsung’s newest flagship and since Knox is a software piece it could be easily delivered via air once the phone has been purchased by a prosumer or deployed in enterprises,” he said by email.

During the earnings call, Samsung noted it does not make distinctions between B2C and B2B sales when numbers are reported. However, the company wants to continue building the eco-system that is conducive to supporting business, which is evident from the direction Samsung is going in – towards increasing ROI for enterprises and providing B2B solutions.

The Samsung Store
To grow its base even more, Samsung plans to extend its reach by marketing directly to end-users through Best Buy. The “Samsung Experience Shops” started rolling out in NYC’s Times Square, on Wednesday, April 24. Nine hundred shops are expected to be up by May, with 1,400 open by the end of summer. (Best Buy currently has about 750 Apple mini-stores.)

The “Samsung Experience” features a range of Samsung mobile devices designed in 460-square feet of prime retail space. In comparison, Apple mini-stores are generally 205 square feet or less. It’s not a knock at Apple. “Best Buy is trying to double down on big opportunities they see in the mobile area and leveraging the fact they are the largest seller of consumer electronics,” Baker said.

Likewise, Samsung is also taking advantage of the opportunity to reach another level. “To be successful in the U.S., you need to be successful with Best Buy,” Baker said. However, he does not believe Samsung is partnering with the retailer only to drive sales, but also to strengthen branding.


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