Problems at Samsung?
Samsung's results shocked many investors as they announced lower revenue despite popular handsets and tablets sold around the world. For those that understand the market Samsung is in, this should not be a surprise.
Samsung is producing products designed to appeal to a wide range of consumers. In particular, their cell phones and tablets have captured the attention of pundits and eaten into the market share of Apple's iPhone. But despite great sales, Samsung suffers from a huge problem of operating-system commoditization.
With Google now releasing phones under their Motorola brand, Google is directly competing with Samsung; this is no doubt going to impact sales for Samsung handsets and tablets. This is why Samsung has been working on a proprietary operating system that would be unique to Samsung devices. The leadership at this South Korean conglomerate recognizes that pricing erosion occurs on a quicker pace if there is not a clear differentiation between products.
(Read more: BlackBerry rocketed into 2014—time for a breather?)
Samsung believes (hopes) they can develop a new operating system to compete with Android complete with a functioning and viable app store. The challenge is how much time do they have before Google prices them out of the Android market? The clock is ticking.
Can Samsung arrest their profit decline and find new ways to make their products less commoditized? That's a tough task. Microsoft has struggled to gain wide adoption of Windows Phone OS. Recent results from Nokia show handset sales are down and this does not bode well for Microsoft's operating system.
(Read more: A window on Microsoft's future?)
While Apple is often criticized as a closed system with restrictive rules regarding the apps available on the device (as well as tight control of operating-system dynamics), there are many who believe that iOS is a more polished operating system that does not vary among handsets. While some efforts have been pursued to jailbreak the iOS operating system, many of the benefits of these efforts have been minimized as Apple incorporates many jailbreak functions into their core operating system. The bottom line is that the Apple iOS is unique to Apple and Apple makes you pay for it.
When Apple reports earnings next week, you will see the benefit of Apple's price premium advantage and how their earnings numbers differ from Samsung's earnings report. Instead of seeing headlines bewailing a profit decline, you will see record sales for iPhones which doesn't even count the new market now opened after the recent agreement with China Mobile.
(Read more: Apple preview: What investors expect on Monday)
This weeks earning's report from Samsung illustrates the stout challenge this company faces in handsets and tablets. They may defy all conventional thinking and make a miraculous pivot. We shall see.
—By Michael A. Yoshikami
Michael A. Yoshikami is the CEO and founder of Destination Wealth Management in Walnut Creek, California. He is also chairman of the firm's investment committee.