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By Georgia Wells and Trisha Thadani 

Samsung Electronics Co.'s decision to pull the plug on its embattled Galaxy Note 7 smartphone could lift the fortunes of rivals, including China's Huawei Technologies Co., Alphabet Inc.'s Google and Apple Inc.

The South Korean electronics giant said Tuesday it would permanently discontinue its Galaxy Note 7 smartphones, following a fraught recall dogged by misinformation and false starts. Note 7 users will now need to buy new phones, creating an opening for competitors, who may also seek to capitalize on diminished trust in the Samsung brand.

Among potential beneficiaries, Apple and Google each launched new phones in the past two months. Apple unveiled its iPhone 7 in September, with a new version of its iOS operating system. Google, which primarily relies on others to make phones for its Android operating system, released the homegrown Pixel last week. All other leading smartphone makers, including Samsung, use Android.

"As I said to [Apple CEO] Tim Cook the other day, they've got pretty good karma, because they launched the iPhone 7 when they did," Lowell McAdam, chief executive of Verizon Communications Inc., told an industry conference in Menlo Park, Calif., on Monday.

Mr. McAdam said some Verizon customers who had Galaxy Note 7s had shifted to iPhones. But Android loyalists have also been choosing Samsung's other, slightly cheaper flagship phone, the S series, as well as devices from Lenovo Group Ltd.'s Motorola line, and Google's Pixel.

"Apple is clearly the prime beneficiary," said Ben Schachter, senior analyst at Macquarie Securities Group. "This was the flagship Android phone and it is catching fire."

Apple shares have risen 3.4% in the past five trading days, as Samsung's woes deepened.

Globally, Samsung is the world's largest maker of smartphones, with 22.8% market share in the second quarter, according to market researcher IDC. Apple ranked second at 11.7%, followed by China's Huawei at 9.3%. IDC analyst Ramon Llamas said the Note series of phones accounts for about 10% of Samsung shipments.

Werner Goertz, research director at research firm Gartner Inc., said Huawei may be in the best position to benefit from Samsung's hiccups because its P9 flagship smartphone has sold well internationally since it was introduced in the spring, particularly in mature markets, where Samsung's phones are popular. The P9 is not yet available in the U.S.

Other China-based makers of Android phones, including Oppo Electronics Corp. and Xiaomi Corp. are less likely to benefit because they sell few phones outside China. But Richard Guppy, executive director for Strategy Analytics, wrote in a blog post that these companies may seize on Samsung's troubles to enter more developed markets.

In the U.S., Gartner's Mr. Goertz said Samsung's loss could be particularly acute because buyers are particularly sensitive to brand image, and are less likely than consumers in other countries to opt for Samsung's other smartphones.

He sees Apple, Huawei and LG Electronics Inc. filling the void for American consumers. LG, based in South Korea, may benefit from U.S. buyers who have shown a willingness to buy a Korean brand. Among Chinese brands, Huawei has already built a strong presence in Europe and has been looking for deeper inroads in the U.S.

Sprint Corp. Chief Executive Marcelo Claure said he expects Samsung to recover quickly. "Brands recover when you make great products, and they do make great products," Mr. Claure said. "It's a blow but it's not a fatal blow."

But Samsung will have to try harder to win back Susan Patey, of St. John's, Newfoundland. After hearing the reports of Note 7s overheating and sometimes catching fire, Ms. Patey returned her Note 7 and is now considering Google's Pixel.

"I was always a really big Samsung fan," Ms. Patey says. But she worries about the safety of Samsung's new phones. "That's probably the reason why I'm going to switch to another phone."

--

Ryan Knutson

contributed to this article.

Write to Georgia Wells at Georgia.Wells@wsj.com

(END) Dow Jones Newswires

October 11, 2016 16:37 ET (20:37 GMT)

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