Samsung feels the power as Galaxy Note 2 lifts off

Even Apple's iPhone 5 couldn't slow Samsung Electronics down.

The Korean conglomerate's flagship Galaxy S III had four of its five best-selling weeks in the U.S. after the iPhone 5 was unveiled, Samsung told CNET.

The spike after the iPhone 5 launch suggests that consumers hung around to see what Apple had to show off, weren't impressed, and went with a Galaxy S III instead.

"I was shocked by the numbers," Kevin Packingham, chief product officer of Samsung's U.S. mobile arm, said in an interview. "I thought: 'What the heck is going on here?'"

It's just the latest bit of good news for a company that has enjoyed a remarkable run to the top of the smartphone business, allowing it to surpass Apple and dominate with a flagship brand that has virtually the same appeal as the iPhone.

Samsung is poised to continue its run into the holidays as it drums up attention for its latest product, the extra-large Galaxy Note 2. In typical Samsung fashion, the company on Wednesday threw a splashy party for media, d-list celebrities, and select Samsung fans in Manhattan's old Post Office headquarters, capping off the night with a performance by Kanye West.

"It's the holiday season and they needed something to generate buzz around its products," said Avi Greengart, who covers consumer products for Current Analysis.

Keep in mind that the event was being held for a product that has already been announced globally and in the U.S., with reviews of the Galaxy Note 2 already widely available.

But that didn't stop Samsung from going big with the event, and partly illustrates why the company has been so successful in battling Apple and establishing its leadership in the mobile world. Few companies have the resources, recognition, and heft to compete with Apple; Samsung just happens to be one of them.

The investment in mobile has clearly paid off. Samsung earlier today posted a record quarterly profit of $7.4 billion, thanks largely to its Galaxy line of smartphones. In this industry, only Apple can boast of better results, having posted an $8.2 billion profit yesterday.

Given the strength and resources of both companies, Apple and Samsung are likely to continue dominating the handset industry, applying even more pressure to its smaller rivals and potentially forcing some out of the business altogether.

Winning 'Phablet' fans
Credit Samsung's persistence in creating a new segment for the success of the original Galaxy Note. The device, bigger than a phone, but smaller than a tablet, was initially mocked by critics who thought it looked silly. But Samsung said the company has slowly won over people despite the large size, and pressed the category even further with the larger Galaxy Note 2.

Samsung said that it had sold 10 million units of the Galaxy Note in the first nine months of availability around the world, but it's unclear how well it actually did in the U.S. The first Galaxy Note debuted earlier this year with AT&T before later getting picked up by T-Mobile USA as well. But given that a majority of smartphone sales at AT&T are made up of iPhones, there's a question mark for how much share the Galaxy Note actually got.

Packingham insisted that the Galaxy Note was "tremendously successful," and that its performance convinced other carriers to add it to their lineup. This time around, the Galaxy Note 2 will be sold by all four national carriers, as well as a few regional ones.

"It's impressive that they have all the carriers lined up," Greengart said.

J.K. Shin, head of Samsung's mobile business, has high expectations for the Galaxy Note 2, and told reporters at a briefing that he expects it to sell three times more quickly than the previous version, hitting 3 million units in the first 90 days.

Samsung's more bullish because the Galaxy Note 2 has the benefit of wider availability and higher awareness from consumers, Packingham said. He added that carriers like the device because it targets the kind of customers they want to go after: power users looking for more from their mobile devices and well-off enough to buy the product.

Galaxy Note 2 vs. iPad Mini?
At $299.99 with a two-year contract, the Galaxy Note 2 isn't for bargain seekers.

In fact, it's only $30 less expensive than the recently released iPad Mini from Apple. (A cellular version starts at $459.) There are, of course, fundamental differences between the two devices, with the Galaxy Note 2 sold more as a phone with a smartphone plan and seen as more of a primary device, while the iPad Mini is more a complementary device. Still, they also aren't that far apart when it comes to size.

Packingham doesn't believe that the Galaxy Note 2 will compete with the iPad Mini. Samsung has a lot of experience with 7-inch tablets, with its Galaxy Tab being one of the first such Android devices, and Packingham said that the customers who buy them are different than ones who would buy the Galaxy Note 2.

While Samsung isn't the first to sell a 5-inch device, the company does take credit for creating this new category of tweener devices. (Internally, executives don't refer to them as "phablets.") The Galaxy Note has spawned follow-up attempts, including the Optimus Vu from LG, known as the Intuition at Verizon Wireless. Packingham, however, was fairly dismissive of other attempts.

"Clearly in this segment, the Note stands alone," he said.

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