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Monday, May 6, 2013

Samsung Could Soon Surpass Apple in Handset Profit

Apple and Samsung Electronics are sucking up every penny of profit in the handset business. But Samsung’s mobile business is growing fast, and the question is: Could it surpass Apple in profit next quarter?

Analysts at Canaccord Genuity, an investment research firm, think so, according to a new report. The report, issued on Monday, said that in the first quarter of the year, Apple took 57 percent of profit in the handset business, while Samsung took 43 percent. That shows substantial growth for Samsung’s phones. For comparison, in the first quarter last year, Apple raked in 74 percent of profit, and Samsung took 26 percent.

In the report, Michael Walkley, a Canaccord Genuity analyst, said he believed that in the June quarter, slowing sales of the iPhone combined with strong sales of Samsung’s new flagship phone, the Galaxy S4, may catapult Samsung to the top spot.

If that were the case, it’s unclear whether Samsung would temporarily take the throne only until Apple introduces a new iPhone. Samsung’s growing market share, especially in foreign markets like China, India and Russia, has analysts speculating that Apple must introduce a cheaper iPhone, on top of its premium model, to retain its lead.

Laurence Isaac Balter, chief market strategist at Oracle Investment Research, which has clients that own Apple shares, is concerned about the Cupertino company’s future. The reason: Samsung makes so many different models of phones, and many customers are being lured to its Galaxy phones, which have bigger screens than all of Apple’s iPhones. That’s where Apple missed the boat, he said.

“Is the current iPhone size the future or is the larger screen?” Mr. Balter said. “The market is clearly saying the larger screen. People, when they’re faced between the two, are choosing the larger screen.”

Steve Dowling, an Apple spokesman, declined to comment on the report. But he pointed to the company’s last earnings call, where the company warned that its gross margins would probably continue to fall in the fiscal third quarter, dropping to between 36 and 37 percent.