Goliath Versus Goliath

This post is syndicated at The Motley Fool Network: http://beta.fool.com/malayappan/2012/12/19/goliath-versus-goliath/19388/

I finally caved! Yes, I did.  I decided to go ahead and gift my kids a Samsung Galaxy Note tablet after I saw a great deal on the Internet for a $100 off the sale price.  I got the tablet with 32GB onboard memory for $449.99.  How could I possibly go wrong? I thought, although as abundant precaution, I did ask my wife and daughter to check it out first at the local Best Buy store before ordering.  Of course, there is an inherent issue with “store browsing” at Best Buy and giving my business elsewhere, but that is the topic of my next post – Store Browsing at Best Buy for the Holidays.  Samsung is not traded in US stock exchanges, so if you want to trade it, you will need a broker with trading privileges on the Korea Stock Exchange (KRX).

Electronics is Always a Commodity 

In the early 1990’s, I used to build personal computers for myself and they were completely tricked out, maxed out to the hilt with parts that I would buy from wholesale merchants.  It would cost me about $5000 or so to build and friends and office colleagues would try to buy them off me and I would oblige sometimes.  Similarly configured systems from Hewlett Packard (NYSE:HPQ) or DELL Computers (NASDAQ: DELL), would retail for about $7500, I was saving hugely.  I would sell my systems for a small $100 profit, since I really just enjoyed starting over and build a new one.  Sometimes, I would use the computer that I built for a year and then resell them without losing too much money.

As the years went by, my cost lowering strategy of building my own computers did not make sense any more.  In the early part of this millennium, I finally gave up building my own computers when the cost to build was greater than what I could purchase a new one for retail and the resale value of a used computer went down to less than $100.  Similarly, in the year 2000, I bought a Compaq IPaq for $550 that was worthless after a few years.  I could give other similar examples, but anecdotally, every consumer by now should know that when it comes to an electronic product, it ultimately becomes a commodity and worthless after a few years.  Unless of course it is legendary collector’s item such as an original Macintosh from Apple (NASDAQ: AAPL).  Almost every other electronic item would be hard to even give away, which is why one often finds them in the trash (environmentally hazardous). 

The Tablet Phenomenon 

Given this experience with electronic items and as a trained Electronics Engineer, no wonder, I refuse to fork out $800 or so for a top of the line iPad that would have WiFi and 4G wireless connectivity.  Even a sparingly configured iPad would cost more money that I am willing to pay for the reasons stated above.  I expect an iPad bought today to be worth nothing in a few years.  In fact, I fully expect a new iPad that one might buy in 2016 to be worth about $299 or less!  However, until recently, the iPad had little competition but now has an array of competitors aligned against it, including Samsung with their Galaxy Note. 

I personally have not touched any tablet, not the iPad and not the Galaxy Note and I doubt that I ever will.  I work neck deep in technology, but I go for the gadgets that increase my productivity such as a computer or a laptop with a keyboard.  A functional “smartphone” is the only other accoutrement that I need and that about rounds it up for me.  I have no time for mucking around with a currently overpriced, half-useful device such as a tablet, but I can understand peer pressure and the notion of “keeping up with the Joneses”.  No one in our friend or family circle has the Galaxy Note, but nearly everyone has some kind of Apple device such as the iPad or the iPhone.  Understandably, everyone is curious to see what our experience is going to be with the Galaxy Note, so we do get some initial bragging rights!

Goliath Versus Goliath

This holiday season market analysts across the investing spectrum are eagerly watching to see who is going to win the rapidly snowballing food fight between the two Goliaths of the phone and tablet industry – Samsung and Apple.  Over the airwaves and in newsprint and media, we are swamped by analyses and advertisements that would make one believe that there are only two kinds of phones and two kinds of tablets in the market that are made by either giant.  Conveniently forgotten is the range of tablets available from a multitude of other manufacturers such as the Kindle Fire HD from Amazon (NASDAQ: AMZN) and the Nexus 7 from Google(NASDAQ: GOOG) and much more.  However, none managed to capture my imagination in the same way as the Galaxy Note and that too came with an enormous catch!  That catch alone is enough to declare Apple the winner of this holiday season’s electronics war.

What is the catch?  Well, deluged by the advertisements from Samsung, I set out to research their tablet offerings.  What I found out was very confusing.  The Galaxy Tab first caught my eye, and the price was very appealing.  This is what I suspect most consumers bought this holiday season because it was heavily marketed and heavily discounted and price matched. Turns out, this is an older model tablet that obviously is part of Samsung’s inventory depletion strategy.  Upon more intensive and deeper research, I found that the latest and greatest offering from Samsung was the Galaxy Note tablet that has a namesake which is Samsung’s latest phone!  A Google search for the tablet using the keyword “Galaxy Note” will turn up the phone, not the tablet.  If one was none the wiser, he or she would never learn that a tablet with the same name is available.  An incredible missed opportunity for Samsung!

Apple won this round, but this is I am sure a very close call!  However, one man’s Goliath is another one’s David.  So, read all about it in my next post, Goliath Versus David!