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Science

Manufacturers tap into money making mobiles

Tech companies are looking to make more profit from the phones in our pockets. And the fight for market share is on as computers get dumped in favor of smartphones and tablets.

The ongoing smartphone boom has meant record results for electronics giant Samsung. The South Korean company earned $5.97 billion (4.6 billion euros) for the third quarter of 2012, nearly doubling its operating profits in comparison with the same period last year.

Market researchers said they expected Samsung to have sold nearly 57 million smartphones in the third quarter. The company is the world's largest mobile phone producer and controls about a third of the market. Most Samsung phones make use of Google's Android operating system.

Apple, Samsung's main rival, also saw its profits increase by 24 percent in the last quarter, growing to 6.3 billion euros. The US company sold about 27 million iPhones.

To keep money coming in the door, the two companies have been engaged in a series of bitter patent disputes. Judges have issued injunctions against the sale of some Samsung products for possibly infringing on patents owned by Apple.

An Apple IPhone 4s and Samsung Galaxy S are seen in this illustration photo in Berlin August 27, 2012. Photo: REUTERS/Pawel Kopczynski

Apple and Samsung traded barbs in courts around the world

"The smartphone market is the largest driving force in the IT sector," said Achim Barczok, a mobile media expert at the German computer magazine c't. "Growth is still possible. That's why the market competition is fierce."

Smartphones "are an absolute cash cow," said Tobias Arns, of Germany's Federal Association for Information Technology, Telecommunications and New Media (Bitkom). He added that profit margins are higher than with computers.

Fight for users

Many industry experts predict that a growing portion of Internet activity will occur on smartphones and tablet computers. That's one reason why Google and other companies are focusing attention on the mobile market.

Google has rolled out a new version of its Android operating system, which phone producers can install free of charge on their devices. Some 40 percent of cell phones in Germany run on Android, according to Bitkom.

"Google profits because every user who wants to take full advantage of an Android mobile phone has to have a Google account," said Arns.

That's one way Google can keep people using its products.

"Google is trying to become an all-encompassing service provider on the Internet - to create a type of Google universe," Arns added, pointing to Google's video platform YouTube, e-mail service Gmail and hotel and flight booking services. As Google's main source of profit comes from serving ads, every new user means additional revenue.

The US company has also produced its own mobile devices and in 2011 bought struggling mobile manufacturer Motorola.

Microsoft playing catch-up

When it comes to smartphones and tablets, software giant Microsoft came late to the game. About 7 percent of the smartphone market runs on Microsoft software, but the company hopes the newly released Windows 8 operating system will change that.

A Microsoft Surface tablet PC is displayed on a stand during its launch event with Microsoft Windows 8 in New York October 25, 2012. Photo: REUTERS/Lucas Jackson

Microsoft's Surface tablet runs on Windows 8

Microsoft head Steve Ballmer promised the overhauled operating system, which runs on computers and tablets, would be the company's most important product in nearly two decades. Some 17 years ago, Microsoft introduced the Windows 95 operating system and established its dominance of the personal computer market.

"With Windows 8, Microsoft is trying to come to terms with the change of tablets and smartphones increasingly becoming users' main computing devices," said Barczok. He added that the operating system would provide users with the same display, whether seen on a computer monitor or tablet computer.

The new operating system has potential to be a success, according to Barczok. There are enough programs designed for the mobile version to make it useful, and smartphone manufacturers are looking for an Android alternative.

Smartphones worldwide

The smartphone market has great growth potential in many developing countries, "especially in Asia," said Barczok. "Many people use the smartphone as a relatively inexpensive alternative to the computer."

In developing countries, stripped down versions of smartphones are especially big sellers. These operate with smaller processors and simpler displays, but use the same operating systems as the more expensive smartphones and can use the same applications, giving Samsung, Apple and the rest the potential for an increasingly global market.

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