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Samsung Beaten by Sony Corporation (ADR) (SNE) at Its Own Game

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Sony Corporation (ADR) (NYSE:SNE) will be releasing the Sony Corporation (ADR) (NYSE:SNE) Xperia Z Ultra in the third quarter, and it will be the best smartphone product the company has ever developed. The product will come with features like water proofing and its triluminous display. The display is superior to the AMOLED and Retina displays, giving it a distinct feature that will help to differentiate it from its competitors.

Sony Xperia Z Ultra

Source: GSMArena

The Sony Xperia Z Ultra is Sony Corporation (ADR) (NYSE:SNE)’s attempt at a land grab from Samsung, challenging the Samsung Galaxy Note 2 in particular. The Galaxy Note 2 comes with a 5.5 inch screen, but when compared to Sony Xperia Z Ultra’s 6.4” screen, even the Samsung phablet looks small. Because of the ridiculous size of the Sony Xperia Z Ultra, many of you investors are most likely wondering, will it at least fit inside of a pocket? The answer is yes, at least with men’s pants, according to this video.

Sony Corporation (ADR) (NYSE:SNE)Is the smartphone race about who’s got the biggest phone? Not necessarily, but the phablet (phones with a screen bigger than 5 inches) market is rapidly growing. According to BI Intelligence, the market should grow at a 63% rate for the next three years. Sony Corporation (ADR) (NYSE:SNE) is projecting that it can grow smartphone shipments by 27-30% this year. But if the forecast of 63% growth is accurate, then Sony could beat its own sales forecasts and make up for lost revenue from selling the PlayStation 4 for a $100 cheaper than the Xbox One.

How about Samsung?

Globally, Samsung and Apple Inc. (NASDAQ:AAPL) are well ahead of Sony Corporation (ADR) (NYSE:SNE) with both Samsung and Apple Inc. (NASDAQ:AAPL) logging sequential year-over-year growth in global market share. Sony is far behind in the ninth spot in terms of market share. Sony has around 1.9% market share, but given enough time the company’s unique portfolio of mobile products should be able to propel the company into the number four spot ahead of LG. In a previous article, I mention that Sony’s brand is the fourth most valuable among all mobile competitors. As long as the product specifications are up to date with the latest in technological advancement, Sony Corporation (ADR) (NYSE:SNE) should have a comparative advantage over Samsung in terms of branding.

I estimate that Sony will ship 15 million units of its Sony Xperia Z Ultra and Z in a single quarter and perhaps 60 million units per year. For this to happen though, Sony would need to find ways to distribute its Sony Xperia Z Ultra smart phone.

In the United States, the first carrier that will carry the phone will most likely be T-Mobile or Sprint. T-Mobile is willing to carry the Sony Xperia Z through a phone contract, so given enough time, other carriers will soon offer the Sony Z ultra through a contract. Sony will gain a foothold in the US smartphone market and that in turn will lead to market share gains against rivals like Samsung and Apple Inc. (NASDAQ:AAPL).

Analysts remain pretty optimistic about Sony Corporation (ADR) (NYSE:SNE), and believe that the company may be able to grow earnings by 54% per year over the next five years. To be fair, this rate of growth is also driven by currency market fluctuations.

Lack of optimism in Samsung

Reuters reports:

Woori Investment & Securities, one of South Korea’s largest securities firms, cut its outlook for Samsung’s earnings and target share price on June 5. It was the first to adjust its view. A massive wave of downgrades has since followed, with forecasters including JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS) and Goldman Sachs taking a harder look at their assumptions of how well the S4, Samsung’s latest Galaxy smartphone, would actually do. Sales estimates for the S4 was slashed by as much as 30 percent, stirring investor concerns over Samsung’s mobile devices division – the company’s biggest profit generator.

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