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How long will Samsung need Google?


(MoneyWatch) COMMENTARY Apple (AAPL) rules the smartphone and tablet world, as evident from the company's latest quarterly profit of $13 billion on sales of $46.3 billion. Are there any gear makers that use Android, Google's (GOOG) rival mobile operating system, that can compare?

Try Samsung. The Korean giant recently reported quarterly revenue of nearly $40 billion and income of $5.1 billion. Those sales don't come only from smartphones, of course; the company also makes electronic components, household appliances, and a range of other products (including Apple's vaunted "retina" display for its gadgets). But it is notable that about two-thirds of Samsung's profits come from phones.

Ironically, that may be more of a concern for Google than for Apple.

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Traditionally, an operating system company like Microsoft (MSFT) could control its business relationships. No single hardware vendor accounted for a majority of its business (if you don't go back to the IBM DOS days).

Google is in a completely different position. Even if Apple makes more money, Samsung is still huge -- last quarter its revenue was roughly four times greater than Google's. More importantly for the search giant, analysts say that Samsung sold more handset units last quarter than Apple sold iPhones. (It's hard to know for certain as Samsung stopped reporting unit sales.)

That doesn't necessarily tie Samsung more strongly to Google, as you might expect. The reason has to do with Google's business strategy with Android. The mobile platform is open-source, and vendors can change it as they wish, although too much change and Google cuts off access to some key services.

That limitation hasn't stopped Amazon (AMZN), which created a new version of Android. If Skyhook Wireless CEO Ted Morgan is right, such "forking" will only continue. (Granted, Morgan has a grudge against Google, which his company alleges interfered with Skyhook getting its location services onto Motorola (MOT) devices.)

But Amazon makes it clear that companies can go their own direction, and it's still unclear how much of the pull of given products is because of the Android association, or whether people buy the device rather than the operating system. Furthermore, how long does it take Google to roll out a new version of Android to existing devices? That can severely limit the value the company can offer its hardware partners.

Plus, if Samsung or any other successful Android manufacturer went its own way, could Google really afford not to make services available at this point? That would be losing a lot of potential customers and ad revenue.

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