Samsung sells enough phones to twist Google's Android arm

Samsung

COMMENTARY The smartphone wars have largely boiled down to Apple (AAPL) and Google (GOOG). Sure, Research in Motion (RIM) and Microsoft (MSFT) are still technically around, though hardly looking good. But smartphones have become a largely two horse race. And that's what makes Samsung's announcement of record profits so interesting when looking at the mobile industry.

With phone manufacturer HTC showing a financial decline and Samsung selling an estimated 35 million smartphones in the past quarter, the South Korean company takes on new significance. If you're responsible for nearly half the Android registrations that Google gets, suddenly what you want out of the operating system becomes pretty darn important.

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A lot of phones

At last count, Google has been seeing a flood of new Android device activations. The current run rate is about 255.5 million a year -- that's nearly 64 million a quarter.

Even if Apple sees as many as 35 million iPhones sold for the last quarter, the additional iPads and iPhone touches still don't get it close to 64 million. The question is, who are the big movers for Google? The one name that stands out is Samsung.

Even though the company doesn't report smartphone unit sales as Apple does, analysts estimate that Samsung may have sold 35 million smartphones last quarter alone.

Roll out the red carpet

At current rates, and assuming that virtually all of the sales were of Android models, Samsung would be responsible for close to 55 percent of Android smartphone movement. That puts Google into an interesting situation.

Even though Google is using a PC-like business model, it isn't achieving the degree of independence from hardware vendors that Microsoft once enjoyed. What would management do if Samsung decided it could get along fine with some other option for running its phones? Not even Motorola (MMI), which Google is buying, could come close to making up that type of volume.

Unlike virtually any other Android hardware vendor, Samsung has Google over a barrel. It could push for changes, new technical directions, and features that it thought would be good for its strategic plans. What could Google say? Go use Windows Phone? Google can't afford for Samsung to even consider the possibility.

[Al-Jamaki-Katsumoto]

You're kidding, right? Android would probably be better off without Samsung.

[eriksherman]

@hypnotoad72 - It's not redundant. Windows Phone itself is a software product, but when you're talking about smartphones that use Windows Phone, those are separate products. Or would you instead say Windows Phones, which would be confusing and not specific enough?

[somfw]

And why exactly couldn't google afford it?
Last time I checked 100% of Nothing is still Nothing, which is basically what people pay to use Android.

Google is just the name behind Android, Whatever money they dump into it, is considered advertising expenses and written off. To put it more simply for you. They Lose money on it.

IF samsung stopped selling Android and went with Windows phone - which they wouldnt, Google wouldn't lose anything.

[somfw]

And why exactly couldn't google afford it?
Last time I checked 100% of Nothing is still Nothing, which is basically what people pay to use Android.

Google is just the name behind Android, Whatever money they dump into it, is considered advertising expenses and written off. To put it more simply for you. They Lose money on it.

IF samsung stopped selling Android and went with Windows phone - which they wouldnt, Google wouldn't lose anything.

[eriksherman]

Google needs Android to be successful because it gets indirect income. The OS is an important part of the company's strategy. That's why Google will have to keep Samsung satisfied.

[eriksherman]

Not so many people have purchased Windows Phone products. Doesn't mean they dislike it. Anyway, it still leaves Samsung with a lot of leverage, far more than any single hardware vendor has had on Microsoft for many years.

[Kris-J]

Yeah, I don't think so. People are buying their phones because they like Samsung products and they like the Android OS. Not so many people like the Windows Phone OS. Samsung isn't going to jeopardize they're surging profits because Google doesn't bend to their will. If it ain't broke, don't fix it.