Samsung’s Numbers Spell Doom For Apple Inc. (AAPL)

Don’t invest in smartphone makers

I wouldn’t suggest anyone purchase Samsung stock on the belief that the Galaxy line will surpass the iPhone. That could happen, but it isn’t really a fair representation of where the market is going.

In short, the smartphone market is over. Competitive pressures have accelerated to such a great extent that no company is likely to ever capture as much from the sale of handsets as Apple did in 2012.

As Apple remains wholly dependent on the iPhone for the majority of its revenue and profit, Apple Inc. (NASDAQ:AAPL) shouldn’t be expected to do particularly well either. Capital returns may keep a floor in the stock, but barring the introduction of a revolutionary new product, margins will continue to compress as the competition improves.

If one remains keen on getting exposure to the smartphone market, Google Inc (NASDAQ:GOOG) seems to be the better play. Although Google makes no money off Android directly, the widespread adoption of Android benefits the search giant tremendously. More top-tier Android handsets means more gmail users, more Google maps users, more Google search users, and potentially more Google+, Google Docs and Google Music users.

Samsung, Apple and Google

The popularity of Samsung’s Galaxy devices has grown tremendously in recent years, enough to threaten Apple Inc. (NASDAQ:AAPL)’s iPhone empire. But the real problem with companies dependent on the smartphone market is the wave of competition coming.

Other Android makers should soon offer devices every bit as good as Samsung’s (arguably, HTC already does). That’s good for the consumer, but not for the companies behind the phones. Margins should continue to plummet as companies compete amongst each other in a cutthroat competition for sales.

If anyone stands to benefit, it’s Google, whose Android operating system seems destined to maintain its dominant position.

The article Samsung’s S4 Sales Figures Are a Disaster for Apple originally appeared on and is written by Salvatore “Sam” Mattera.

Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple and Google. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.