Samsung, Google Partnership Is Equally Successful, Threatening: Report

The Google-Samsung partnership has made both companies piles of money. But their reliance on each other is also making both nervous, says a report.

Samsung will this year begin selling smartphones running the Tizen mobile operating system, in a move intended to begin lightening Samsung's reliance on partner Google, which makes the Android operating system run by Samsung's successful line of Galaxy devices. But the growing discomfort in the relationship, The Wall Street Journal reported Feb. 25, actually goes both ways.

At the Mobile World Congress event in Barcelona, Spain, this week, Google "is meeting with other companies in hopes that their Android devices can keep Samsung's leverage in check by providing legitimate competition," The Journal reported, citing people familiar with the situation.

HTC, LG, Motorola and others offer Android smartphones, but none has had nearly the success that Samsung has. During the fourth quarter of 2012, Samsung controlled 43 percent of the Android market and overall aggressively outsold all competitors, Apple included, according to Gartner.

Samsung's resources and reach are advantages that "no other competitor can easily match," Gartner said in a Feb. 13 statement. Principal Analyst Anshul Gupta added that, with the next-place Android vendor holding just a 6 percent share, "the Android brand is being overshadowed by Samsung brand, with the Galaxy name nearly a synonym for Android phones in consumers' mind share."

Andy Rubin, senior vice president of Mobile at Google, told Google executives at an event last fall that while Samsung's success has been mutually beneficial, Samsung could nonetheless "become a threat if it gains more ground among mobile-device makers that use Android," The Journal reported.

More specifically, there's a fear that Samsung will demand a greater share of the ad-based revenue that its devices help Google generate.

In the past, Samsung has received more than 10 percent of such revenue, sources told The Journal, but the company has "signaled to Google that it might want more, especially as Google begins to produce more revenue from apps such as Google Maps and You Tube," which Samsung preloads on its Android tablets but Amazon, for example, leaves off its Kindle Fire tablets.

In addition to trying to work more closely with its other Android partners, Google-owned Motorola is said to be working on a high-end device, code-named the X Phone, that it hopes will be able to compete head-to-head with the Apple iPhone and the Samsung Galaxy S IV, which Samsung is expected to introduce in mid-March.

The X Phone, said the rumor mill, is likely to feature a massive battery, an excellent camera and a very durable design, and Kevlar has been mentioned.

What it's not likely to feature is Android perks that Google's other partners aren't privy to. When Google purchased Motorola, it promised that the hardware maker would get no special software treatment.

Though that's exactly the type of thing that a too-muscular Samsung might demand. Rajeev Chand, an analyst at investment firm Rutberg & Co., told The Journal that the threat from Samsung is real, and over time Samsung could use its power to negotiate better terms from Google. That could include getting "better versions of Android software before other manufacturers," said Chand.

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