Samsung’s (005930) unprecedented success with Android smartphones and tablets has Google (GOOG) shaking in its boots. Company executives are worried Samsung has become so big that it “could flex its muscle” to renegotiate its mobile-ad arrangement and eat into Google’s profits, The Wall Street Journal reported. A majority of Android devices come preloaded with various Google applications that generate the company a considerable amount of ad revenue. Samsung is said to receive more than 10% of revenue from its advertising partnership with Google, however the company has signaled that it might want more. Google has a backup plan in case Samsung plans on going rogue, though.
Andy Rubin, the head of Android, previously praised Samsung’s success and called it mutually beneficial, but also warned that the company could become a threat if it gains too much ground on other manufacturers. Google executives are now said to be meeting with several other companies to ensure that “their Android devices can keep Samsung’s leverage in check by providing legitimate competition.”
If HTC’s new One smartphone fails to impress consumers, for example, Google has a backup plan.
Rubin reportedly said that Google’s recent acquisition of Motorola Mobility served as “a kind of insurance policy against a manufacturer such as Samsung gaining too much power over Android.” The company has said numerous times, however, that it wouldn’t favor any one manufacturer over others.
Recent reports suggest Google is working with Motorola to develop a new high-end smartphone, codenamed “X Phone” for now, to legitimately compete with Apple’s (AAPL) iPhone and Samsung’s Galaxy line of devices. The handset is rumored to be lined up for a May debut at the company’s annual I/O developer conference.
For now, Google and Samsung continue to view each other as partners in the never-ending battle against Apple, but their friendly relationship may not last forever.
