Samsung Electronics has released estimated earnings numbers ahead of its full earnings report on April 27th, and the numbers are bright indeed. Samsung estimates a record operating profit of $5.15 billion dollars, handily beating street estimates. Much of that success stems from stronger than expected sales of the Galaxy Note; Samsung has sole more than 5 million of the stylus-toting phablets since October, and Note sales are expected to increase in the coming months.
The report also noted that Samsung expects sales to increase further in the coming months as it releases its next generation Galaxy S III handset, which is expected to “engage in a full-fledged war” with Apple’s iPhone 5, expected to ship in the third quarter of 2012.
While Apple has remained the biggest customer of Samsung’s manufacturing services, it’s easy now to see why Samsung was willing to risk that relationship when they moved to directly compete with Apple; Samsung’s profit margin on Android devices is reported to exceed 20%, and the resulting profits from their smartphone division made up almost 70% of profits this quarter. While their margins are lower than Apple’s industry-leading margins of 37%, Samsung’s handset margins are much higher than what they can command by selling parts to other companies.
Samsung’s assault on the smartphone market has been surprisingly swift in its success. With just 3% of the smartphone market in 2009, Samsung has displaced entrenched competitors like HTC and Motorola to climb to the top of the Android ecosystem. According to comScore, Samsung made a quarter of all mobile phones sold in the U.S. over the last three months (that number includes feature phones).
In short, while other Android OEMs are struggling to differentiate themselves in the market place, Samsung has surged ahead and shows no sign of slowing down. Products like the Galaxy Note show that they are willing to bet on new form factors – a bet that is now paying off handsomely.