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Samsung sells enough phones to twist Google's Android arm


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.