For once, LG may beat Samsung

Samsung has been touting the latest strategy for Tizen — this time as an integrated OS for its smart TVs. It’s earned dozens of news stories this month, all tied to its promotional efforts for this week’s CES show in Las Vegas.

Samsung has always been better at announcing and publicizing Tizen strategies than it has been at executing on them. It did not skimp on the grandiloquent predictions when its original incarnation (then called Bada) was announced in November 2009:

Samsung Launches Open Mobile Platform: Samsung bada – The Next Wave Of The Mobile Industry
November 10, 2009
Samsung Electronics Co. Ltd., a leading mobile phone provider, today announced the launch of its own open mobile platform, Samsung bada [bada] in December. This new addition to Samsung's mobile ecosystem enables developers to create applications for millions of new Samsung mobile phones, and consumers to enjoy a fun and diverse mobile experience.

In order to build a rich smartphone experience accessible to a wider range of consumers across the world, Samsung brings bada, a new platform with a variety of mobile applications and content.
…
Based on Samsung's experience in developing previous proprietary platforms on Samsung mobile phones, Samsung can create the new platform and provide opportunities for developers. Samsung bada is also simple for developers to use, meaning it's one of the most developer-friendly environments available, particularly in the area of applications using Web services. Lastly, bada's ground-breaking User Interface (UI) can be transferred into a sophisticated and attractive UI design for developers.

Samsung will be able to expand the range of choices for mobile phone users to enjoy the smartphone experiences. By adopting Samsung bada, users will be able to easily enjoy various applications on their mobile.

Encouraged by Samsung, one analyst predicted that Tizen would make up “half of its portfolio by 2012.”

Instead, (according GSM Arena) only 11 bada models ever shipped — out of more than 3200 models during the past 5 years — before bada was discontinued in favor of Tizen — a merger of bada and the Intel- and Nokia-flavored mobile Linuxes (among others).

Samsung announced its first Tizen phone — the Samsung Z  — June of 2014. A defeatured version of the Galaxy S5, it debuted not in Korea — or North America or Europe — but in Russia, suggesting the company did not think it could compete head to head with the latest Android and iOS phones. In fact, it was even ready for a third world BRIC country: the release was cancelled due to a lack of applications.

At CES this week, Samsung announced that Tizen would jump species — from its viral reservoir in rare smartphones and smartwatches — and become the only OS it uses for its smart TVs. I had three reactions.

First, so what? Yes, as the leading TV vendor Samsung can push out lots of copies of Tizen. But does anyone care what OS is in their VCR, DVR, Blu-ray, TV or home stereo? (I care about the OS in my car stereo — due to cellphone compatibility — but that’s a story for another time.)

Second, Samsung is saying: “let’s ship a platform in a product category where no one cares about app availability.” In other words, it may never win developer support for Tizen — and thus a large assortment of apps — but on TVs, who cares?

Finally, while Tizen frees Samsung from dependence on the evil Google, is shipping Tizen an asset for Samsung — or a liability?

Under the hood, Tizen has a very robust Linux, reflecting bada’s 2011 merger with MeeGo, which in turn built upon years of work by Nokia (with Maemo) and Intel (with its Maemo fork called Moblin). (It also included the failed Linux Mobile standard, LiMo).

However, a robust OS under the hood means nothing if it has a clunky UI. Exhibit A is the Symbian OS with Nokia’s aged S60 UI; Exhibits B-Z are every incarnation of desktop Linux known to mankind.

Which brings me to the dark horse: LG. I hadn’t noticed, but two years ago LG bought webOS, the failed Palm smartphone OS that HP owned for three years before dumping it. This week LG announced it’s using webOS for its own TVs.

Almost six years ago, webOS was a really good smartphone OS. But despite Palm’s efforts to double-down on its modern OS, it wasn’t enough to save the company. Now, webOS has a $100+ billion/year company behind it — and unlike with OS — a large volume of shipping products where it can run.

With a product strategy that usually consists of copying Samsung — much like Panasonic copied all its Japanese rivals — LG is rarely thought of as an innovative company. But here, instead of copying Samsung by developing its own lousy embedded OS, it bought a good one.

Again, will it matter? Will the TV OS matter more than screen size, brightness or — most importantly for a commodity product — price? As a former software guy, I want software to matter in providing differentiation. But I’m not going to bet even one dollar of our youngest’s college fund on it.

Dick Tracy phone in London before NYC

Some 60 years after it was imagined by Chester Gould, and more than six months after the product was pre-announced at CES, LG recently released its “GD910” watch phone. Dick Tracy never heard of 3G networks or touch-screen LCDs, but he did sport the world’s first (albeit fictional) wrist-mounted videophone.

Priced at £500, the first 50 phones that went on sale in London sold out in 10 minutes, although more are coming. The phone is also available in Dubai but not the US.

The FT reviewer raved about the phone in this morning’s “How to Spend It” conspicuous consumption supplement. However CNET UK was more restrained.

However, FT reviewer Jonathan Margolis notes the main value delivered by the phone is status:

Will you find it useful? Absolutely not — unless it’s to impress people in offices, bars, airport lounges and everywhere else on the planet. … It’s the Bugatti Veyron of gadgetry: pointless, impractical, sublimely silly but impossibly desirable. Could it be a rebirth for the most unwanted technology in gadget history, the video phone call? Of course not, don’t be silly.

If it’s available for sale without a required data plan, then at $834 actually quite a bit cheaper than the iPhone. Also more exclusive — a few hundred vs. 30 million — even if it’s not nearly as useful.

Diversified embarrassment risk

After rah-rah enthusiasm during the 1960s and early 1970s, the strategy of unrelated diversification has fallen out of favor with strategists and financial markets. GE nothwithstanding, it’s been shown that firms waste a lot of managerial time trying to manage disparate businesses that have no synergies, and that stockholders can better diversify risk by buying their own shares in the underlying businesses. Such unrelated diversification still remains a pattern in countries where the aggregate market power overrules the underlying inefficiences, such as Korea’s chaebol and (until recently) Japan’s kigyō shūdan.

Today, the Wall Street Journal published a list of companies doing business with Iran to help finance its oil and gas development. American frustration with Iran is building since it seized 15 British sailors and Marines on March 23, and some in the Senate are proposing a boycott of firms that do any business with Iran.

Most of the companies on the WSJ list are energy companies, but one jumped out — Korean conglomerate LG. The LG Group doesn’t have much (any?) petrochemicals presence in the US, but instead it sells a lot of LCD screens via its joint venture with Philips. More visibily, its LG Electronics subsidiary is the world’s fifth largest maker of cell phones (at about 6% in 2006) and the largest maker of CDMA handsets.

LG has a potential exposure here, but it’s not clear how big. Right now, the US pressure on firms doing business with Iran is fairly weak: it’s not clear whether the ultimate pressure will begin to resemble the (successful) anti-apartheid divestment efforts of the 1980s, or whether it will just fizzle out.

In some cases, the risk of scandal in a diversified company is severe. The broad portfolio of clients (not technically diversification) held by Arthur Andersen & Co. proved to be its undoing, as the choice of one particular Houston-based company proved fatal. However, as a “Big Five” accounting firm, Andersen was in the business of renting its previously stellar reputation to validate the financial statements of public firms, so once it lost its reputation it had nothing. Obviously thousands of former Andersen employees wish that the Houston office had not taken that client (or had done a better job of protecting Andersen's storied 90-year-old reputation). And the damage to the Andersen brand accelerated the decision of its Andersen Consulting spinoff to rebrand itself as Accenture.

LG won’t face such a consequence, if for no other reason than the Korean government won’t allow it to happen. If the pressure increases, the RoK government will probably try to protect LG rather than a more pro-active strategy such as separating the electronics and petroleum companies into separately traded firms.

Also this week, the diversified company ITT was fined this week for transferring military technology to China. Given that Loral survived (despite bankruptcy) after transferring ballistic missile technology to China, ITT is likely to skate after paying its $100 million fine for the night-vision goggle technology.

Technorati Tags: LG, mobile phones, diversification