Samsung $299 Galaxy Gear Tests Demand for Smart Watches

Sept. 5 (Bloomberg) -- Brian Blair, principal and senior tech analyst at Wedge Partners and Robert Burke, chairman & CEO at Robert Burke Associates, examine the market for Samsung Galaxy Gear and whether it will drive sales to other Samsung products. They speak on Bloomberg Television's "Bloomberg Surveillance."

Samsung Electronics Co. (005930) set the price of its Galaxy Gear at $299 as the biggest maker of smartphones beats Apple Inc. (AAPL) in unveiling a wristwatch device that can make phone calls, surf the Web and take photos.

Featuring a 1.63-inch (4.1-centimeter) screen and 1.9-megapixel camera, the Gear will go on sale Sept. 25, Shin Jong Kyun, head of Samsung’s mobile business, said at the company’s headquarters in Suwon, South Korea. The device syncs with tablets and smartphones using Google Inc.’s Android software to make phone calls.

Samsung showed the Galaxy Gear yesterday at IFA, Europe’s largest consumer-electronics show, as it races Apple and Sony Corp. (6758) to carve a share of the market for wearable technology amid slowing growth in smartphones. The first companies to sell devices that multitask could lock customers into their platform and boost device sales, with researcher Strategy Analytics expecting 500,000 Galaxy Gears to be shipped this year.

“Device makers like smartwatches because they are personal devices that are highly visible to consumers,” Neil Mawston, an executive director at Strategy Analytics, said in an e-mail. “If you see your friend wearing a cool smartwatch on their wrist, you will probably want one, too.”

Photographer: Krisztian Bocsi/Bloomberg

Attendees watch a presentation about the Samsung Electronics Co. Galaxy Note 3 and Galaxy Gear during the unveiling ahead of the IFA consumer electronics show in Berlin on Sept. 4, 2013. Close

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Photographer: Krisztian Bocsi/Bloomberg

Attendees watch a presentation about the Samsung Electronics Co. Galaxy Note 3 and Galaxy Gear during the unveiling ahead of the IFA consumer electronics show in Berlin on Sept. 4, 2013.

The Gear weighs 74 grams (2.6 ounces), is available in six colors -- including orange, gold and lime green -- and has an ultra-thin screen using organic light-emitting diode, or OLED, technology. Sales will begin in 140 countries, with the U.S. and Japanese debut in October.

Apple IWatch

The device has a fitness tracker and works with about 70 applications, according to Samsung. It has a 4-gigabyte internal memory and 512 megabytes of RAM. It links wirelessly to a user’s smartphone. Samsung unveiled the Gear at a tented event in central Berlin, away from IFA’s giant halls, to thousands of attendees.

A built-in speaker enables hands-free calls from the Gear while voice recognition features allow users to draft messages, set alarms and check the weather.

Samsung rose 1.9 percent to 1,365,000 won as of the close of trade in Seoul. The stock has dropped 10 percent this year compared with a 2.3 percent decline for the benchmark Kospi index.

Apple, based in Cupertino, California, has a team of designers working on a watch-like device, two people familiar with the matter said in February. The company sought trademark protection for the “iWatch” name in Japan, according to a June 3 filing. Sony already has its Smartwatch that syncs with Android handsets. The Smartwatch 2 will reach stores this month, and can be used as a second screen for the Xperia Z1 smartphone, Sony said yesterday at IFA.

Photographer: Krisztian Bocsi/Bloomberg

An attendee demonstrates the Samsung Electronics Co. Galaxy Gear after the unveiling ahead of the IFA consumer electronics show in Berlin, on Sept. 4, 2013. Close

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Photographer: Krisztian Bocsi/Bloomberg

An attendee demonstrates the Samsung Electronics Co. Galaxy Gear after the unveiling ahead of the IFA consumer electronics show in Berlin, on Sept. 4, 2013.

Rival Smartwatches

“We expect Samsung Galaxy Gear to sell reasonably well, but it is most likely to be Apple that catalyzes the smartwatch industry,” Mawston said. “Apple should be able to blend the iWatch into its iOS ecosystem in a much tighter way than the fragmented Android community.”

Qualcomm Inc. (QCOM), the biggest maker of chips for mobile phones, will begin selling a connected wristwatch called Toq, the company said yesterday.

Sales of wearable gadgets, including the Galaxy Gear and Google Inc.’s SmartGlass eyewear, will grow to 70 million units in 2017 from 15 million this year, according to Jupiter Research. The watch industry will generate more than $60 billion in sales this year.

Samsung also unveiled its Galaxy Note 3, a combination smartphone and tablet computer with a 5.7-inch screen, improved software and more accessories than its predecessor introduced at IFA a year ago.

Note 3

Running on third-generation networks as well as the faster long-term evolution, the new Note has a 13-megapixel camera and allows users to simultaneously juggle two apps on the same screen with a digital pen, Samsung said.

Photographer: Jin Lee/Bloomberg

An attendee looks at a new Samsung Electronics Co. Galaxy Gear watch, left, during an event in Times Square, New York. Samsung showed the wristwatch today in New York and Berlin as it races Apple Inc. and Sony Corp. to carve a share of the market for wearable technology amid slowing growth in smartphones. Close

An attendee looks at a new Samsung Electronics Co. Galaxy Gear watch, left, during an... Read More

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Photographer: Jin Lee/Bloomberg

An attendee looks at a new Samsung Electronics Co. Galaxy Gear watch, left, during an event in Times Square, New York. Samsung showed the wristwatch today in New York and Berlin as it races Apple Inc. and Sony Corp. to carve a share of the market for wearable technology amid slowing growth in smartphones.

“We’ve moved from delivering devices that offer productivity and creativity to everyday wonders,” Lee Young Hee, executive vice president for the mobile unit, said in an interview. “Together with the main device it will set a different level of ‘smart’ experiences.”

The Note 3 will be released Sept. 25, the same day the Galaxy Gear goes on sale, the company said.

Samsung, also the biggest maker of televisions and chips, is trying to cut its reliance on its mobile business, which accounts for 70 percent of operating earnings. The market for high-end handsets is nearing saturation and prices are falling as consumers in emerging markets gravitate to cheaper models.

“We expect the Note 3 to be an evolution from the previous models,” said Carolina Milanesi, an analyst at Gartner Inc. “I do not expect the Note 3 to change Samsung’s future as far as margins and profits.”

Samsung said in March it will release three top-end smartphones this year. They include the flagship Galaxy S4 that went on sale in April, the Note 3 and a device using the Intel Corp.-backed Tizen operating system that has yet to be revealed.

Apple yesterday sent out invitations to a Sept. 10 event. Apple will announce new iPhones at the event, a person familiar with the plans has said.

To contact the reporters on this story: Jungah Lee in Seoul at jlee1361@bloomberg.net; Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editors responsible for this story: Michael Tighe at mtighe4@bloomberg.net; Anthony Palazzo at apalazzo@bloomberg.net

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