Tizen – Duck in danger.

Tizen increasingly looks like it has no real future at Samsung

• As more and more time passes the less likely it becomes that Samsung will ever make anything of Tizen.
• Instead it will be forced to try and preserve its margins by sticking to Android devices.
• This is a feat that will be very difficult, but not impossible (see below).
• Samsung was expected to launch a Tizen device for the Russian market during the third quarter.
• However Samsung has decided to delay the launch yet again in order to “enhance the Tizen ecosystem”.
• Even the Samsung execs seem to be struggling with the concept of Tizen as the only advantage in developing an app. for it is that one will be at the top of the store. Unfortunately it is an empty store.
• Furthermore Samsung’s failure to launch a device speaks volumes regarding how little Samsung understands anything outside of hardware.
• To get app developers to write apps. one needs to have devices in the market.
• This is how the whole virtuous circle begins. Devices means more apps. which in turn leads to more devices and so on.
• Priming this circle is difficult and expensive (as Microsoft is finding) but it will have to be done if Tizen is not remain on the lab bench.
• I suspect that the device will never launch particularly as Samsung is now in a very tight spot and cannot afford expensive experiments.
• Hence, I would not be surprised to see the whole Tizen development shelved as Samsung scrambles to preserve its device margins.
• Now that it has ceded control of the ecosystem to Google (see here) Samsung has 4 options to preserve margins.
  • First. Drill down on costs. This will be difficult as its products are fast becoming a commodity but there are savings to be had in R&D as Samsung is no longer developing an ecosystem.
  • Second. Offer Digital Life services on a local basis that do not compete with Google’s global offering. Samsung is already trying this but I am not holding out much hope.
  • Third. Work with developers to produce Samsung specific versions of their apps. I think that this is Samsung’s best shot at preserving margins but I have seen no progress to date.
  • Fourth. Create a cross device experience so compelling that owners of Samsung TVs and tablets prefer to buy a Samsung phone. This is still at a very early stage and I am not convinced that Samsung will succeed here.
• Consequently, I still see Samsung’s handset margins declining to around 11% over the next few years resulting in a meaningful decline in group earnings.
• Samsung is cheap but I can’t think of a single tech company that has ever outperformed with declining earnings.