January 16, 2012 11:34 am

Samsung moves to reduce Google focus

Samsung Electronics is merging its homegrown Bada operating system into a platform backed by Intel, the US chipmaker, to bolster its weak software and reduce its dependence on Google’s Android.

The move by the world’s largest technology company by sales comes as South Korean groups have privately expressed concern about Google’s $12.5bn acquisition of Motorola Mobility last year, warning of a long-term threat if powerful software producers make their hardware effectively in-house.

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Samsung builds successful hardware but software is its Achilles heel as it relies on Google to run its premium smartphone models. Analysts have predicted Samsung will seek to both diversify its portfolio of operating systems and acquire outside technology.

Kang Tae-jin, a senior vice-president at Samsung, said Bada would be merged into a platform it is building with Intel called Tizen. Speaking to Forbes magazine at the Consumer Electronics Show in Las Vegas, Mr Kang said Samsung would run its first device on Tizen this year but cautioned it would not become Samsung’s main platform “anytime soon”.

Samsung in Seoul confirmed the strategy but added Bada would also continue to exist. Bada currently represents only about 2 per cent of global operating systems while Android commands more than half the market.

Intel also announced at CES that it was branching into the smartphone business, with Lenovo due to sell the first device running on its chips later this year.

Samsung estimated its hardware sales – particularly Galaxy smartphones which are the main rivals to Apple’s iPhones – helped lift operating profit to $4.5bn in the final quarter last year, 73 per cent more than the same period in 2010.

In spite of Samsung’s struggles to build appealing software, Lee Kun-hee, chairman, struck an unusually muscular tone about the position of South Korean companies such as Samsung in developing technology.

“Japan is rather tired and China has a long way to go to catch up with Korea,” he told reporters at the CES. In the third quarter of 2011, Samsung posted four times more net profit than the 19 main listed Japanese technology and consumer electronics companies combined.

Earlier this year, Mr Lee called for Samsung to make its corporate culture more “open, flexible and innovative”. Samsung executives often use such language to refer to design and software, branching out from the traditional bedrock of speedy manufacturing.

Jae Lee, analyst at Daiwa Securities, said the Tizen project should give Samsung greater opportunity to differentiate itself from competitors.

“If Samsung fails to upgrade its own operating system, it will face limits in adding value and increasing margins for mobile devices. It is also difficult to differentiate their products much from the others with only hardware. If it joins forces with Intel and others, it means more resources,” he said.

Separately, Samsung said it planned its first overseas debt sale since 1997, issuing five-year bonds worth about $1bn to finance expansion of its chip factory in Austin, Texas, which produces processors for mobile devices.

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