The Shape of Things to Come: Samsung’s Galaxy Note or Phablet

Samsung beat analysts profit expectations for the first quarter spurred by strong sales of its smartphones, its new hybrid Galaxy Note phablet and TVs.

People have given to Samsung’s new hybrid device that is somewhere between a smartphone and a tablet a name of “phablet.” Photo: Pierre Lecourt/Flickr

Samsung Electronics reported that its quarterly profit has reached 5.8 trillion won ($5.1 billion) for the three months ending March 31, up from 2.95 trillion won a year earlier. The prediction of Samsung’s profit for the quarter by a group of 32 analysts from Bloomberg was only 5 trillion won.

Choi Do-yeon, analyst at LIG Investment & Securities, said the bigger-than-expected rise in Samsung’s first-quarter earnings, while revenue was in line with forecasts, is the indicator that handset margins were strong.

“Handset margins are estimated to have topped 20 per cent and profits from the division also topped 4 trillion won. This is really a blowout result and there could be more surprises in the coming quarters as other businesses such as chips show recovery,” the expert said.

Late last month the company revealed that its new hybrid device the Galaxy Note, a 5.5-inch kind of over-sized smartphone with tablet capabilities, had sold over 5 million units. Samsung added it hopes to sell at least 10 million Notes devices this year.

“Higher-than-expected shipments of the Galaxy Note seem to have given an upside to earnings,” Lee Ka-keun, an analyst at Hana Daetoo Securities, told Reuters. “Note sales will increase further in the second quarter, and handset profit will grow despite a rise in marketing costs related to the London Olympics.”

Consumer and design experts suggest that the surprise success of the “phablet” marks a deeper shift in the fast-paced world of mobile devices.

“Smartphones are more about entertainment. The Note was created by simply breaking that taboo and focusing more on the new functions that smartphones require,” said Samsung Vice President Lee Minhyouk.

“We’re seeing a shift in the marketplace and there’s room for diversity,” explained Shivesh Vishwanathan, senior solutions architect at Persistent Systems. “Smartphone devices are personal to people and are being used in unique ways – which explains why we’re seeing some strong reactions for as well as against ‘phablets’.”

Stuart Lipoff, a technology consultant and past president of the IEEE Consumer Electronics Society, compared it to the mature TV market: from small sets parked in the kitchen to wall-sized mounted screens.

“This is part of the normal evolution of any category of consumer electronics as it matures,” he said. “As any product category matures you see an expansion in the range of features, performance and price.”

However, Samsung hybrid device suggests the company, which last year was recognized as the world’s top smartphone maker, may have found a way to eat into the tablet market, where it remains a distant second to Apple’s iPad.

“Samsung has successfully cracked open the 5-inch device market, where Dell failed miserably a couple of years ago,” said Lee Kakeun, an analyst at Hana Daetoo Securities in Seoul.

“It’s now expanding into the bigger-sized tablet market, where its stylus could differentiate it among non-iPad tablets and help it expand market share in the tablet market, too.”

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