Samsung admits its iPad-rival Galaxy Tab sales were actually "quite small"
After boasting last fall that sales of its Galaxy Tab were "faster than expected" and had reached 2 million, Samsung has now admitted to analysts that its figures were only "sell-in" inventory shipped to retailers, and that actual units bought by consumers were "quite small."
Update: Samsung has since noted that rather than "quite small," the executive said "quite smooth," an interesting description of sales that provides little hint at just how many devices actually sold to consumers. Reports of deeply discounted Galaxy Tab offers, and a return rate of 16 percent suggest that "smooth" might also be the wrong word.
Sales of Samsung's Galaxy Tab were closely watched last fall because the device represented the first generation of Android tablets to take on Apple's iPad, as it was the only Android tablet device that was actually reported to be selling in any real quantity.
A month after announcing plans to launch its new 7 inch tablet on all four US carriers at an event in September, Samsung claimed it had sold 600,000 units, and by the end of the quarter it had reported sales of 2 million.
However, in the company's quarterly earnings call with investors on Friday, Samsung executive Lee Young-hee clarified that those numbers related only to inventory channel stuffing, and did not represent actual sales to end users, according to a report by Wall Street Journal blogger Evan Ramstad.
By "sales" we mean unsold inventory
"As you heard," Lee replied to a question asking for more detail on Galaxy Tab sale numbers, "our sell-in was quite aggressive and this first quarterly result was quite, you know, fourth-quarter unit [figure] was around two million.
"Then, in terms of sell-out, we also believe it was quite smooth. We believe, as the introduction of new device, it was required to have consumers invest in the device. So therefore, even though sell-out wasn?t as fast as we expected, we still believe sell-out was quite OK."
"Sell-in" refers to sales to retailers and channel distributors, while "sell-out" refers to the actual sales made by retailers to consumers.
The report said Lee was "quite optimistic" about future sales but that she wouldn't forecast sales for 2011. "As you know," Lee said, "the tablet is relatively new and we need to see how the market develops before we give any firm numbers."
Apple has been selling the iPad since April, giving it a head start over the Galaxy Tab of about two quarters. However, Apple sold 3.27 million in its first partial quarter, 4.19 million in its second, and 7.33 million in its third, with global demand regularly outstripping Apple's ability to build enough units during the year.
Mythical market share
Samsung's reported "sales" of the Galaxy Tab were sufficient to distort market share in the "tablet market," inducing one firm to report that Apple's share of tablet sales with the iPad had shipped from 95 percent to 77 percent due to supposedly surging demand for Android-based tablets.
"The Samsung Galaxy Tab was the main driver of Android success,? reported Neil Mawston, a director at Strategy Analytics. His firm contrasted Apple's sales of more than 7.33 million iPads against collective Android shipments that had reportedly jumped from just 100,000 in the previous quarter to 2.3 million in the winter quarter.
The vast majority of that "jump" was Samsung's unsold inventory of 2 million units shipped but not sold, leaving the real number of Android tablets actually sold to consumers and in use "quite small."
Gartner and IDC have similarly imagined a market for "media tablets" much larger than the iPad itself, but both still admit that Apple's iPad is the only significant member of this group, which the reporting companies currently segregate from PC and netbook sales, Windows-based Tablet PCs, and low end tablets oriented toward ebook reading.
Tablet market greatly exaggerated
The Journal report noted that a Samsung spokesman responded in an email today saying "that most media accounts treat Galaxy Tab as 'a noteworthy accomplishment,'" adding, ?I believe the company, overall, is on the same page.?
Major initial reviews of the Galaxy Tab characterized it as a product that 'needs work,' was "not exemplary," and "not without frustrations," even as the reviewers bent over backward to describe it as a potential "real rival" to the iPad.
In its more technical review examining the Galaxy Tab's HTML5 capabilities, Sencha described the device as odd and disappointing, with missing support for key web technologies, poor performance in general due to a lack of hardware accelerated animation, poor media performance, and a strange device pixel ratio that "makes the Galaxy slightly bigger than a regular phone screen in CSS pixels, but not really big enough to handle what people want to put in a tablet screen."
Samsung is not alone in reporting channel stuffing as sales. In the same quarter, Microsoft used similarly creative inventory channel "sales" reporting to create the impression that Windows Phone 7 devices were selling to users, when in fact just 1.5 million devices had been shipped to resellers in hopes that some would eventually sell.
Update: Samsung has since noted that rather than "quite small," the executive said "quite smooth," an interesting description of sales that provides little hint at just how many devices actually sold to consumers. Reports of deeply discounted Galaxy Tab offers, and a return rate of 16 percent suggest that "smooth" might also be the wrong word.
Sales of Samsung's Galaxy Tab were closely watched last fall because the device represented the first generation of Android tablets to take on Apple's iPad, as it was the only Android tablet device that was actually reported to be selling in any real quantity.
A month after announcing plans to launch its new 7 inch tablet on all four US carriers at an event in September, Samsung claimed it had sold 600,000 units, and by the end of the quarter it had reported sales of 2 million.
However, in the company's quarterly earnings call with investors on Friday, Samsung executive Lee Young-hee clarified that those numbers related only to inventory channel stuffing, and did not represent actual sales to end users, according to a report by Wall Street Journal blogger Evan Ramstad.
By "sales" we mean unsold inventory
"As you heard," Lee replied to a question asking for more detail on Galaxy Tab sale numbers, "our sell-in was quite aggressive and this first quarterly result was quite, you know, fourth-quarter unit [figure] was around two million.
"Then, in terms of sell-out, we also believe it was quite smooth. We believe, as the introduction of new device, it was required to have consumers invest in the device. So therefore, even though sell-out wasn?t as fast as we expected, we still believe sell-out was quite OK."
"Sell-in" refers to sales to retailers and channel distributors, while "sell-out" refers to the actual sales made by retailers to consumers.
The report said Lee was "quite optimistic" about future sales but that she wouldn't forecast sales for 2011. "As you know," Lee said, "the tablet is relatively new and we need to see how the market develops before we give any firm numbers."
Apple has been selling the iPad since April, giving it a head start over the Galaxy Tab of about two quarters. However, Apple sold 3.27 million in its first partial quarter, 4.19 million in its second, and 7.33 million in its third, with global demand regularly outstripping Apple's ability to build enough units during the year.
Mythical market share
Samsung's reported "sales" of the Galaxy Tab were sufficient to distort market share in the "tablet market," inducing one firm to report that Apple's share of tablet sales with the iPad had shipped from 95 percent to 77 percent due to supposedly surging demand for Android-based tablets.
"The Samsung Galaxy Tab was the main driver of Android success,? reported Neil Mawston, a director at Strategy Analytics. His firm contrasted Apple's sales of more than 7.33 million iPads against collective Android shipments that had reportedly jumped from just 100,000 in the previous quarter to 2.3 million in the winter quarter.
The vast majority of that "jump" was Samsung's unsold inventory of 2 million units shipped but not sold, leaving the real number of Android tablets actually sold to consumers and in use "quite small."
Gartner and IDC have similarly imagined a market for "media tablets" much larger than the iPad itself, but both still admit that Apple's iPad is the only significant member of this group, which the reporting companies currently segregate from PC and netbook sales, Windows-based Tablet PCs, and low end tablets oriented toward ebook reading.
Tablet market greatly exaggerated
The Journal report noted that a Samsung spokesman responded in an email today saying "that most media accounts treat Galaxy Tab as 'a noteworthy accomplishment,'" adding, ?I believe the company, overall, is on the same page.?
Major initial reviews of the Galaxy Tab characterized it as a product that 'needs work,' was "not exemplary," and "not without frustrations," even as the reviewers bent over backward to describe it as a potential "real rival" to the iPad.
In its more technical review examining the Galaxy Tab's HTML5 capabilities, Sencha described the device as odd and disappointing, with missing support for key web technologies, poor performance in general due to a lack of hardware accelerated animation, poor media performance, and a strange device pixel ratio that "makes the Galaxy slightly bigger than a regular phone screen in CSS pixels, but not really big enough to handle what people want to put in a tablet screen."
Samsung is not alone in reporting channel stuffing as sales. In the same quarter, Microsoft used similarly creative inventory channel "sales" reporting to create the impression that Windows Phone 7 devices were selling to users, when in fact just 1.5 million devices had been shipped to resellers in hopes that some would eventually sell.
Comments
Channel stuffing is when a company puts more product into the channel than they KNOW they will sell just to make the financials. We would have to see evidence of that. It's a serious misjudgment, because it is illegal to report stuffing as income for the quarter.
This is the problem with manufacturers rushing a product that they know is not ready for prime-time, is junk, and provides minimal user-experience. Even worse is when the media comes out with articles praising the competition and the apple-haters giving anything Android great reviews.
Oh wait... Android trolls here will probably spin this to be another "but..but.. but...<insert spin sentence here>"
It can't be assumed that this is channel stuffing. There could have been real expectations that both WP7 and the Galaxy Tab would have sold close to those numbers, even though it didn't work out.
Channel stuffing is when a company puts more product into the channel than they KNOW they will sell just to make the financials. We would have to see evidence of that. It's a serious misjudgment, because it is illegal to report stuffing as income for the quarter.
True, but it is clearly a misrepresentation of sales data. Samsung made it seem as though their product was actually selling to customers. Now they're stuck with a full channel and more than likely won't be able to "sell" as many in the following quarter. This is probably why they're warning investors of small actual sales numbers now. And the possibility of many left in the channel being dumped when newer Android tablets hit the market.
It can't be assumed that this is channel stuffing. There could have been real expectations that both WP7 and the Galaxy Tab would have sold close to those numbers, even though it didn't work out.
Channel stuffing is when a company puts more product into the channel than they KNOW they will sell just to make the financials. We would have to see evidence of that. It's a serious misjudgment, because it is illegal to report stuffing as income for the quarter.
Agreed but there maybe some stuffing going on as the reported sales figures were most likely intended to achieve the media frenzy they did and then actually encourage sales of the very product that had been stuffed ... if you see what I mean.
Jobs was right about problems with the form factor.
True, but it is clearly a misrepresentation of sales data. Samsung made it seem as though their product was actually selling to customers. Now they're stuck with a full channel and more than likely won't be able to "sell" as many in the following quarter. This is probably why they're warning investors of small actual sales numbers now. And the possibility of many left in the channel being dumped when newer Android tablets hit the market.
Yep. One way or another, they will sell / dump these units at fire-sale prices just to unload them and somehow claim that all their Android tablets are sold-out.
It can't be assumed that this is channel stuffing. There could have been real expectations that both WP7 and the Galaxy Tab would have sold close to those numbers, even though it didn't work out.
Channel stuffing is when a company puts more product into the channel than they KNOW they will sell just to make the financials. We would have to see evidence of that. It's a serious misjudgment, because it is illegal to report stuffing as income for the quarter.
Whatever you call it they flat out misrepresented the truth when they first report 600K and later 2M. I think (although I have no hard facts) that they felt they could sell more by reporting higher numbers - since very few were actually sold to end users there were no complaints which some might read as meaning it must be good. They new what they were doing - the gamble did not pay off as they had hoped so they will suffer this next quarter (at least) I am sure.
Samsung - the truth hurts doesn't it!
My guess is that there's going to be some strenuous walk-back within the day, as this story blows up on line. Maybe they thought an offhand remark would slip under the radar, but they're going to have to say something. You know, executive misspoke, didn't have all the info, or just the boilerplate "We are very pleased with the performance" etc.
I'm assuming a quarterly earnings call required them be at least somewhat forthcoming about actual sales, if for no other reason that the figures were going to speak for themselves. But that being the case, surely they knew this day would come? Did they hope to get momentum going and catch up on sales after the fact?
Man, Samsung, first that horror show at CES and now this. Are you actually insane?
Right now Motorola and RIM are making noise and blowing same smoke. When their tablets actually appear in the market, the same thing will happen.
The mistake that all these wannabes make is this; iPad is not meant to replace is laptop. iPad is a tool, not a commodity electronic. I don't see any major corporation ordering Motorola Xoom for the IT department. Most buyers will use to play a few games that will be available, and also to to get on internet and watch videos.
MS, Dell and others are notorious for rushing a subpar product to market and then wonder why it flops.
Typical PC junk-makers. At least I have to give the guy credit to at least have some kind of decency to man-up and tell it like it is.
That guy's a lady!
The report said Lee was "quite optimistic" about future sales but that she wouldn't forecast sales for 2011.
Same with the android name! Uggh
Apple's tablet is called, iPad not "superNova" tablet!
It can't be assumed that this is channel stuffing. There could have been real expectations that both WP7 and the Galaxy Tab would have sold close to those numbers, even though it didn't work out.
Channel stuffing is when a company puts more product into the channel than they KNOW they will sell just to make the financials. We would have to see evidence of that. It's a serious misjudgment, because it is illegal to report stuffing as income for the quarter.
If they forced partners (ie, carriers/retailers) to buy inventory, then there may be some legal improprieties there. But otherwise, a sale is a sale. MS and Samsung don't sell direct to consumers (for the most part). Their customers are their retailers, so yes, a sale is a sale when the inventory is transferred to the carrier or retail partner.
Now, is it misleading? Yes. Of course people want to know the actual units sold to customers, not those sold to retailers. But the retailers aren't required to divulge that info. Notice, when pressed by the analyst Samsung never actually said exactly how many units were "sell-outs" since they don't have to. They know the number, but are under no obligation to share it.
Let me tell you that the Android business is bull****. If you play in that arena you will be left with so much unsold sh** as you try and out do the scores of OEMS pimping Android as well.
These companies load the channels and declare a win without knowing they actually were bought by consumers.