Samsung Challenge to Apple and Google Stumbles
Telecoms Balk at Korean Firm's New Tizen Mobile OS
Updated Feb. 2, 2014 6:02 p.m. ET
SEOUL—An ambitious effort by
Samsung Electronics Co.
005930.SE -0.63%
to roll out smartphones powered by a new operating system is on shaky ground.
The world's largest smartphone maker
is investing a large amount of resources on an operating system called
Tizen to challenge the mobile software duopoly of
Apple Inc.
AAPL +0.16%
and
Google Inc.
GOOG +4.01%
But some of the world's major wireless carriers are beginning to pull their support of phones slated to run the platform.
Tizen
(pronounced TAI-zen) also has had trouble attracting large developers
of applications that are increasingly at the center of the user
experience. That is leaving the fledgling platform in the hands of tiny,
relatively unknown players, like
Daniel Escobar,
a 34-year-old developer in Atlanta.
The
South Korean company is supporting Mr. Escobar's Maestro music-sharing
service, which has about 30,000 subscribers, with tens of thousands of
dollars in cash incentives and technical support to develop an app for
Tizen.
The imperative for Samsung to figure out a mobile software and services strategy is critical.
Chinese smartphone makers—including a potentially strengthened
Lenovo Group Ltd.
0992.HK -8.21%
following its planned acquisition of Google's Motorola Mobility
handset unit—threaten to push down handset prices and squeeze hardware
margins. That would make software and services the industry's primary
profit engine.
The entrance to a Samsung Electronics office building in Seoul, South Korea.
European Pressphoto Agency
"Consumer needs are changing along with the changing times," Samsung co-Chief Executive
Boo-Keun Yoon
said last month. "I don't feel you can lead the market by focusing solely on software or hardware."
Samsung's
best-selling smartphones currently run on Google's Android operating
system and come preloaded with Google mail, mapping functions and
mobile-ad searches. As a result, it is the Mountain View, Calif.,
company that is taking a cut of every purchase made on its app store.
If
Tizen were to succeed, it would give Samsung its own stream of revenue
from sales of third-party apps, software and services on its devices.
The
potential is enormous. In its most recent fiscal year, Apple generated
$16 billion in sales from software and services, including the iTunes
and App stores.
Samsung, which has been developing Tizen with help from
Intel Corp.
INTC -0.81%
and others, is pouring billions of dollars a year into software
development more generally and devoting about 60% of its 67,000 research
and development engineers to software innovation, with plans to hire
another 800 engineers a year.
Samsung's
longer-term aim is for Tizen—named to evoke a Zen-like "tying together"
of different devices and functions—to serve as a unified operating
system that can coordinate functions on every device a consumer owns,
including a smartphone, refrigerator, television set and washing
machine, all of which the company makes.
Prototype
Tizen devices, one of which has been reviewed by The Wall Street
Journal, look and feel similar to those running Android, with which it
shares a common programming code base. But those involved in the project
say the prototypes can't be judged as final products, and Tizen's
central appeal is that it allows for more customization of the interface
by carriers and manufacturers than are possible with Android.
Yet industry executives and analysts say it has been difficult to get Tizen off the ground.
NTT DoCoMo Inc.,
9437.TO -3.49%
Japan's biggest telecommunications operator and a close partner
on Tizen, had been gearing up to announce its first Tizen smartphone in
mid-January, with President
Kaoru Kato
rehearsing his presentation a month in advance, a person familiar
with the matter said.
But on the day
DoCoMo was set to release its device, it instead shelved its plans,
citing a lack of demand in its home market for an alternative to Android
and Apple's iOS operating system.
Two
weeks later, Mr. Kato said at a news conference for DoCoMo's quarterly
earnings that "Tizen continues to be extremely important." But, he
added, "we will watch global market trends to decide on a launch."
DoCoMo's
sudden about-face was the latest setback to the much-delayed Tizen
project, which has its roots in another homegrown Samsung platform,
Bada, that eventually was shut down. Tizen originally was slated for
commercial release in 2012.
In the U.S.,
Sprint Corp.
S -1.43%
joined the Tizen Association in May 2012, saying it welcomed the
broader consumer choice offered by a new operating system. But Sprint
left last year and now is focusing its resources "on more immediate
product launches," a person familiar with the matter said.
Spain's
Telefónica SA
TEF.MC -0.35%
also exited the association, which oversees development of the
operating system, and last year released the first commercially
available mobile phone running on Mozilla's Firefox, another upstart
operating system. Telefónica saw Firefox as a better way to make inroads
in the low-end Latin American phone market, a person familiar with the
matter said.
France's
Orange SA,
ORA.FR -0.94%
another partner that had planned to release its first commercial
Tizen smartphone alongside DoCoMo, said the speed of development at
Tizen "is not as mature as we may have expected at this point." The
carrier doesn't have a Tizen device in its current smartphone road map,
an Orange spokesman said.
Samsung
responded that it would evaluate product offerings in Japan and France
with the mobile operators. Samsung said the company and its partners
would offer a "sneak preview" of the newest Tizen devices this month on
the sidelines of Mobile World Congress, an annual exposition in
Barcelona for the global mobile industry.
Samsung's
difficulty in introducing its own operating system comes amid a series
of moves that appear to have improved an increasingly strained
relationship with Google. While Google and Samsung continue to talk up
the strength of their partnership in public, the two companies
increasingly were stepping on each other's toes, pushing Samsung to
accelerate its efforts to develop Tizen.
"Samsung can't have a future where Google owns the experience and Samsung becomes the dumb screen company," said
Rajeev Chand,
managing director at Rutberg & Co., a San Francisco-based investment bank that focuses on the mobile industry.
Samsung
and Google last week said they had signed a wide-ranging
cross-licensing deal on technology patents that covers the companies'
existing patents, as well as those filed over the next 10 years.
Three
days later, Google said it would sell its Motorola Mobility unit to
Lenovo for $2.9 billion, ridding itself of a direct competitor to
Samsung's Android-powered smartphones.
It was unclear whether Samsung's recent rapprochement with Google was driven by its struggles with Tizen.
"With
Google we have a close relationship and we will continue to be an
important strategic partner and collaborate together," a Samsung
spokesman said. Samsung will continue to support multiple operating
systems, he said.
Samsung's software
pitch to third-party app developers, meanwhile, has been built around
two of its biggest assets: its clout and its hefty cash reserve of $50
billion.
To attract interest in Tizen
among third-party app developers, Samsung in October held its first
developers' conference, at a hotel in San Francisco, where executives
stressed Samsung's size and commitment to software. In November, the
company held a Tizen developers' conference in Seoul.
Samsung
and Intel also are sponsoring a contest that will dole out $4 million
in prizes for Tizen app developers, a strategy employed with limited
success by
Microsoft Corp.
MSFT +2.66%
and
BlackBerry Ltd.
BB.T -3.56%
—two other big names that struggled to break into the market with alternative operating systems.
But
for some of the biggest, most established app makers—the ones most
critical to Tizen's success—even cash incentives haven't been enough to
stir interest in the fledgling platform.
Several
months ago, Samsung offered the developers of one of Android's most
popular apps, which has been downloaded more than 50 million times, more
than $100,000, in line with similar incentives from Microsoft, to adapt
its app for Tizen, according to a top executive at the app developer.
The
company, which had collaborated with Samsung closely in the past,
turned the Korean company down, concluding that Samsung's previous track
record in software made it unlikely that Tizen could gather an
audience, the person said.
"Software developers just care about the number of mobile phones on the market," Tizen Association Chairman
Roy Sugimura
said in an interview.
Mr.
Sugimura said Tizen had about 6,000 apps as of December, a far cry from
the nearly one million apps on Apple's iOS. "Such an attitude makes it
very difficult for Tizen to get approval because right now there are no
users."
So far, Samsung has had more success wooing smaller developers, such as Mr. Escobar in Atlanta.
Mr.
Escobar said Samsung first approached him in late 2012 with a proposal
that he create an app for his Maestro music-streaming service on a new
operating system that it was developing. Mr. Escobar, who had already
built a Maestro app for iOS and Android, said he was skeptical at first.
He hadn't even heard of Tizen.
But
Samsung agreed to cover his company's development costs, "and then
some," he said. He said he also was impressed by Samsung's size and
commitment to making Tizen succeed.
"At least in our case, there's far more to gain than there is to lose," Mr. Escobar said.
"We're
not talking about a small company. We're talking about a company with
hundreds of millions of phones being sold.…You can't walk away from
those eyeballs."
—Mayumi Negishi in
Tokyo, Sam Schechner in Paris, David Román in Madrid and Ryan Knutson in
New York contributed to this article.
Write to Jonathan Cheng at jonathan.cheng@wsj.com
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