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STEVE INSKEEP, HOST:

On a Thursday, it's MORNING EDITION, from NPR News. I'm Steve Inskeep.

RENEE MONTAGNE, HOST:

And I'm Renee Montagne. Samsung has been on a roll. The hype surrounding its latest smart phone, the Galaxy S4, created a buzz in the tech press and lots of chatter that the South Korean company was poised to eat Apple's lunch. As NPR's Steve Henn explains, Samsung's long-term position in the smartphone market is a bit more complicated. The story begins today's Bottom-line in Business.

STEVE HENN, BYLINE: In August of last year, Samsung accomplished what once seemed almost impossible: its top-of-the-line smartphone briefly outsold the iPhone. By this winter, the company was confident enough to buy a two-minute-long Super Bowl commercial, and not mention its arch rival even once.

(SOUNDBITE OF SAMSUNG COMMERCIAL)

PAUL RUDD: Hey, man. How's it going?

SETH ROGAN: How are you?

RUDD: What are you doing here?

ROGAN: Samsung wants me to be in their new, like, their big commercial - next big thing. Yeah.

HENN: Just a few years ago, Samsung was one of more than a half-dozen big companies that were trying to break into the smartphone market by selling phones with Google's Android software. If Apple was Snow White, Samsung was one of Google's seven dwarves. But today, all that's changed.

CHRIS DIXON: Well, they've done a phenomenal job, sort of emerging from a pretty large set of handset makers to be the clear leader.

HENN: Chris Dixon is a venture capitalist at Andreesen Horowitz. Last year, Samsung sold more smartphones than any company in the world. Last quarter alone, the cash from this part of Samsung's business shot up by more than 50 percent. But Dixon doesn't buy into the idea that Apple is about to be unseated.

DIXON: The closest sort of analog to where Samsung is would be Dell.

HENN: Dixon says today the smartphone business reminds him a lot of what the PC industry looked like in the '90s. Charles Golvin at Forrester Research sees the similarities, too. He says every time a new Android phone comes out, there are...

CHARLES GOLVIN: Reviews about its CPU and its - the size of its display and how many pixels per inch and big its camera sensor is, blah, blah, blah. And really, you know, it's boring. Who cares? You know, what matters is what kinds of software and new experiences can you actually deliver.

HENN: And it's Google and Apple that are creating those new experiences. Those two companies control the software that powers most phones. Samsung runs on Android. Dixon says these platforms also...

DIXON: Attract the majority of the users and developers, and get sort of an increasingly strong position.

HENN: Apple and Android have created a kind of virtuous cycle, making them more appealing and ever more dominant. But historically, Samsung makes hardware, and market dynamics there are totally different. Samsung doesn't benefit from virtuous cycle. Instead, it's caught in a never-ending foot race.

DIXON: The prices are driven relentlessly down and the quality relentlessly up, eventually to the point where consumers become indifferent to the differences among the different providers and, you know, that leads to a commodity market.

HENN: Even though Samsung had its best quarter ever last year, the profit margin on each new smartphone it sells is slipping. Many analysts believe it's going to be more and more difficult for Samsung to stand out from other phone-makers unless it can create its own distinctive software.

DIXON: Which is, by the way, why Samsung is significantly increasing their presence in Silicon Valley and is, you know, rumored to be making lots of investments in software.

HENN: Samsung is spending hundreds of millions building a new campus here. It's recruiting new programming talent, and last week, when it unveiled its latest phone, the boldest innovations weren't new chipsets or a high-def screen, but programs that could translate languages or edit photos in surprising new ways. In short, its new phone was all about software. Steve Henn, NPR News, Silicon Valley.

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