Disrupting the Disruptor

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Samsung Is Too Scattered and Spooky to Last

The eye-tracking Galaxy S4 from Samsung (PINK:SSNLF) is making waves, the bears continue to should down Apple (NASDAQ:AAPL) with price targets as low as $274 and everyone is talking about how the Galaxy family of gadgets is taking over the world.

Sure, Samsung stock has doubled since early 2011. But don’t look now … because all this hype might be sign of a top.

Sure, Google (NASDAQ:GOOG) and its Android OS dominate global smartphone market share, and Samsung is one of the biggest brands on this open-source platform. But any investor who has been around the block should know that gadgets that are red-hot can fall out of favor fast — and that companies with their fingers in too many pies can often make costly mistakes.

For all the cult-like appeal of Apple — with interest in its iconic co-founder Steve Jobs and a burning desire to know more about how the company fosters innovation — the Western fanboys of Samsung often have little knowledge of just how scattered and downright spooky the Korean conglomerate is.

SamsungNewsstandThis week’s Bloomberg BusinessWeek cover story is “Samsung’s Secret” — a deep dive into the ascendant Korean conglomerate by senior writer Sam Grobart.

It’s a fascinating package — not just in regards to the company’s electronics division that creates products like the new Galaxy S 4, but also because of Grobat’s visit to the Samsung’s “Creativity Institute” and exploration of the monolithic and mysterious Chairman Lee Kun Hee, who has been at the helm since 1987.

Samsung is known in America for its electronics, but it is also a powerhouse in shipbuilding, life insurance, advertising and even theme park operation with its Everland resort that welcomes more than 6 million tourists annually.

Take this particularly telling excerpt from Grobart’s great BusinessWeek report:

“A Seoul resident may have been born at the Samsung Medical Center and brought home to an apartment complex built by Samsung’s construction division (which also built the Petronas Twin Towers and the Burj Khalifa). Her crib may have come from overseas, which means it could have been aboard a cargo ship built by Samsung Heavy Industries. When she gets older, she’ll probably see an ad for Samsung Life Insurance that was created by Cheil Worldwide, a Samsung-owned ad agency, while wearing clothes made by Bean Pole, a brand of Samsung’s textile division. When relatives come to visit, they can stay at The Shilla hotel or shop at The Shilla Duty Free, which are also owned by Samsung.”

It’s all well and good, therefore, to love what Samsung smartphones and tablets can do. But keep in mind this disparate nature before you start chasing a share in Samsung stock, which trades on the pink sheets and is highly illiquid, or jump into overweight ETFs like the iShares MSCI South Korea Index Fund (NYSE:EWY).

I’m not saying Samsung is going bankrupt or is run by evil overlords hell bent on world domination. But the company produces 20% of South Korean GDP, remains a mystery to the Western public beyond their Galaxy line of devices and has a management style that many investors would equate to cult-like … in a bad way.

Before you think of investing Samsung just because you like its smartphones, take a good look at what you’re getting into.

The in-depth look at the company from BusinessWeek will hit newsstands in print Friday, March 29.

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Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.

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Comments
  • S J

    This is total BS…….Its clearly an Apple PR article.

  • http://profile.yahoo.com/BRM6FG3ACOTVUDPSINEOWW2LJ4 Ask

    Did my time in the military over there in the 1990′s, the article is pretty true, except for the fact that many of Samsung’s innovation was paid for and bought for from Japanese engineers that were brought over to the country via private jets to free all paid luxury hotels in downtown Seoul and Suwon. Most of the locals know of this since the CEO Lee Kun Hee was jailed during President Noh’s term in office for get this “Tax Evasion”.

    President Noh comitted suicide supposedly, later jumped to his death after leaving office. Rumor has it though, he was bumped off after Samsung CEO Lee and a few other CEO’s from the Chaebols conglomerates were freed on President Lee Myung Bak’s term as Korean President. Then there is the current female president whose sordid laundry list of past dealings and having a military CIA backed father who came to power via a military junta, which some historians liken to Napolean’s rise to power during the French Revolution with her Dictator father acting as Rospierre, Napolean, and Dale Carnegie all rolled into one. POSCO, Hyundai, and SAMSUNG or CJ were founded on President Park Jung Hee using huge industrial loans from Mitsubishi, Nippon Steel, and Dai Ichi Kango Bank now known as the Industrial Bank of Japan. No wonder the deck of cards is clouded in such mystery. Makes the poker card game scene in “Lock Stock and Two Smoking Barrels” by Guy Ritchie seem more transparent and honest than SK politics and their government backed conglomerates. In other words, they can’t lose.

    • Another Guest

      Stopped reading when it became clear you don’t understand how apostrophes work…

      • shadi

        You encourages me to read the apostrophes rule again.

    • Jack

      Stopped reading when it became clear you’re a history-revisionist Japanese on a smear campaign.

    • Guillermo Munoz

      Stopped reading when it became clear you were more scattered than the writer of the article. It’s spooky that people can say so much and make so little sense.

  • David Chung

    Jeff,

    You have no understanding on cultural differences between the west and the east. Samsung’s business culture may not make sense to people that live in the west and including yourself, Jeff. What Samsung is doing is normal business practices and culture in Korea, China, Japan, and other industrial eastern countries.

    Samsung is scattered and spooky? I’m not going to get in to this… However, I do want to mention that Samsung is the world’s 2nd in ship building business after Hyundai, 1st in display, 1st in chip manufacturing, 1st in mobile phones, and 1st in TV business. They didn’t get there by being spooky. They achieved it by being driven with focus and flexible to adapt to new changes. You can compare Samsung as a large battleship and yet agile as speedboat.

  • Pika Naim

    I do realize that this is just a teaser to the main article appearing in the Bloomberg Businessweek, but it nevertheless sounds extremely shallow. Not to mention misleading.

    The title is quite provocative – Samsung is not going to last? What? But our dear correspondent contradicts his own proposition midway through the article, directly denying that he is in any way arguing that Samsung is going to go bankrupt, or is evil. AND THEN, he still prefaces his denial with some nuance-overdosed inferences to Samsung’s disproportionate contribution to the Korean economy, its management style, etc, without actually analyzing or concluding on anything.

    In a better world, this would mildly qualify as yellow journalism. Jeff Reeves is basically basing his not-quite-an-argument-yet-an-argument on the predicament that he finds Samsung ‘spooky’. A sentiment, may I remind you, is not likely to be shared by a lot of people, given that the world (and the American Main Street) is still littered with family-controlled conglomerates. It is the public stock market-obsessed news media of our time that has a warped understanding of what a ‘normal’ management practice is, not conglomerates.

    Mind you, I’d very much prefer it if all companies could indeed have a modicum of democracy in how they run themselves, by being controlled by public shareholders and by being accountable to them. But the real-life experiences with such a model, pioneered and advocated by the Wall Street since the late 20th century, have not been a happy one. If what Samsung does works for the company, who are you to call them spooky, too scattered or anything of the kind?

  • Free___Speech

    If you hear Apple, you think IT such as iPad, iPhone etc. If you hear Samsung, you think vacuum cleaners, toasters, washing machines and yep, phones too.

  • Leng

    What a baseless, ridiculous article. No fact, no evidence. What a waste of cyberspace

  • Mother God

    Should Samsung sue? Mind you, they don’t come from a litigious culture! Spooky hey?