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Apple Inc. (AAPL), Sony Corporation (ADR) (SNE): Samsung’s Smartwatch Looks Like a Dud

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It doesn’t look like Samsung will be selling many Galaxy Gear smartwatches. Early previews of the device have not been kind, and given that it costs $300 and will only work with a single phone (at launch), it was already a tough sell.

That’s distressing for Samsung, a company that’s in desperate need of a new hit device to reignite growth.

Apple Inc. (NASDAQ:AAPL)

The Galaxy Gear falls flat
Samsung’s watch does just about everything you’d expect it to do — it runs apps, it shows incoming messages, it takes pictures, and it allows for voice commands. Unfortunately, it doesn’t sound like it does any of this particularly well.

The Verge, in its hands-on preview, bemoaned the Gear’s interface and general processing speed:

[The] speed and intuitiveness of the user interface — or rather, the lack thereof. There’s a tangible lag to anything you do with the Gear, while the swipe gestures are hard to figure out and do different things depending on where you are in the menus…the speaker built into the buckle is too quiet and makes the old sci-fi action of conducting a phone call via your watch a possibility only in quiet areas…Most of all, however, I find it hard to justify spending the $299 asking price on an accessory like the Galaxy Gear.

Mashable had a similar take:

The performance of the device…is somewhat lacking…we’d like to see snappier reactions to our taps…The Gear is priced at $299. It’s too early to tell, but for that amount of money, the Gear feels just a little bit unpolished.

As did Engadget:

The Gear feels awfully sluggish, whether you’re launching an app…or swiping down from the home screen to activate the camera…The Gear is very much a first-generation device when it comes to usability, too; you can only load a total of 10 third-party apps, for example…The interface also feels a bit clunky and unpolished at times…As we’ve come to expect with many first-generation devices, the Gear has quite a few shortcomings, some of which likely have yet to come to light.

A crisis brewing at Samsung?
The Galaxy Gear is just one of countless devices produced by Samsung — the Korean tech giant makes everything from smartphones to tablets to washing machines, refrigerators, and TVs (if it runs on electrical power, there’s a good chance Samsung makes it). So this device, by itself, isn’t going to make or break the company by any means.

But there is a bit of a crisis brewing at Samsung. As with Apple Inc. (NASDAQ:AAPL), investors are getting concerned that Samsung’s rapid growth could be coming to a standstill. Samsung shares plunged after the company’s recent earnings report — although operating profit was up almost 50% from the prior year, Samsung’s mobile division shrunk on a quarter-over-quarter basis.

Samsung’s management has gone so far as to announce a special meeting in November, intended to lay out the company’s long-term strategy and alleviate investors’ growing concerns.

Inter-ecosystem competition
But Samsung has one problem that Apple Inc. (NASDAQ:AAPL) doesn’t have: inter-ecosystem competition. Android owners looking to buy a smartwatch this fall have at least two choices. Besides the Galaxy Gear, Sony Corporation (ADR) (NYSE:SNE)‘s SmartWatch 2 is set to go on sale at the end of September.

The SmartWatch 2 is about $40 cheaper, but it does lack some major functionality; most notably (unlike the Galaxy Gear), it can’t take pictures and it doesn’t have a microphone. But it does work with nearly all Android phones. Initially, Samsung’s Galaxy Gear will only work with the recently unveiled Note III. Samsung has said it will expand that capability to other Galaxy phones and eventually, other Android phones, but who knows how long that could take.

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