Apple needs to counter Samsung momentum, says analyst

Apple needs to counter Samsung momentum, says analyst

Summary: "To say that the Samsung momentum is an issue for Apple is an understatement," said Barclays analyst Ben Reitzes.

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Samsung has a lot of momentum, a new Galaxy S4 on tap and appears to be poised to tackle the mid-tier smartphone market. As a result, Apple needs to answer the bell in a hurry, according to analysts.

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Despite all the scuttlebutt about Apple's lower-priced iPhone and how important it is, the bigger issue is why the company needs to hit that lower-end market hard: Samsung.

Also see:  Are Android smartphones finally poised to conquer the enterprise? | Samsung Android: Better than Google's Android

In a research note, Barclays analyst Ben Reitzes summed up the Apple vs. Samsung issue well. He said:

Samsung is on its way toward successful launches of mid-tier smartphones (i.e. Galaxy S3 mini and Galaxy Grand) – an area in which we believe Apple needs to be by the end of the summer to remain competitive. To say that the Samsung momentum is an issue for Apple is an understatement. Not only is Samsung helping its own cause, but it catalyzes Android as well. As a result, we need to see Apple expand its iPhone market this year in a big way – and improve its platform in 2013.

Last week, Apple CEO Tim Cook noted that the smartphone market is huge and the company has a lot of running room to grow. The one monkey wrench in that master plan would be Samsung.

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Reitzes largely agreed with Cook. Reitzes said that Apple can regain momentum with iPhone deals with NTT Docomo and China Mobile and launch a lower-cost phone and even a phablet.

The analyst added:

We believe Apple is a platform company and its next great innovations have to come in the form of software and web/data services. We believe these services are needed to keep Apple’s ecosystem ahead of the pack and to attract and retain more users. We believe Apple needs to up its game in web services and platform integration to compete with Android and Samsung. We are hoping to see the seeds of this innovation when the company previews iOS 7 as early as March in an iPad launch event.

That March timeframe is also critical for Apple given that Samsung is likely to launch the Galaxy S4 in mid-March and ship it in April. Apple lacks at 5-inch screen and that's part of the reason Barclays expects the Galaxy S4 to do well.

Meanwhile, the lack of a 5-inch screen is a weakness for Apple, said Reitzes. The catch is that Reitzes doesn't expect Apple to have a larger-screen device until 2014.

In the meantime, Apple's primary focus is likely to be an emerging market iPhone. Morgan Stanley analyst Katy Huberty said that an iPhone mini from Apple at about $330 would be able to compete with Lenovo, Huawei and ZTE in China, which now has a 3G network that could handle data traffic better.

Should an iPhone mini launch, Huberty said that Apple's addressable market in China would triple.

Topics: Tech Industry, Apple, CXO, Mobility, Samsung, Smartphones

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44 comments
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  • Apple has been too busy ......

    suing Samsung. ;-)
    D.T.Long
    • Yes...

      Samsung would like Apple to shift their focus from suing them to bringing out something new they can copy.
      rfoto
      • Copy what...

        Rounded corners and rectangles? If Apple comes out with a 5" screen, can Samsung then suit them? Ohh, and the "bounce" interface or slide to unlock... wow, such innovation.

        Apple makes a nice product and they were the first to do the smartphone right. But the things they sue about had more to do with Jobs's narcissism then any really wrongs.
        Rann Xeroxx
        • Copy what???

          Everything up to and including the packaging.
          rfoto
  • Analysts

    It's well known what Steve Jobs thought of analysts and sales/marketing types--bozos!

    The minute Apple begins letting market share dictate it's next moves, it becomes like every other copycat, knock-off company out there, chasing commodity feature lists into extinction. If Apple is still on track without Jobs, they are already working on the next big thing. Like always, the next big thing takes years to develop in secrecy and when it is announced it sets the competition scrambling to copy and catch up. In the meantime, Apple will continue to improve, and to some extent, line-extend their current products.

    Apple didn't get where they are chasing market share and competing against add-on feature list marketing. They make high quality products that work well within their own ecosystem. They keep their customers happy with great devices and amazing 'one more things' from time to time.

    Under Jobs they always led the device industry. Here's hoping that Cook keeps them on course.
    jaypeg
    • It sounds like you just described Apple of the last few years

      Oddly that seems to be what Apple is doing now.

      Releasing a smaller iPad to combat smaller androids stealing marketshare.

      Getting a bigger screen size in 2012 to catch up to Androids that had the same size in 2011.

      Apple hasn't exactly been doing a lot of innovating the last few years. If you really look at their last several releases you will see that almost across the board none of them brought anything new to market and all the big features are mimicing what Android, specifically Samsung, had already done.

      Hardware is going to plateau and become commodity features soon enough and then software and services will be the big differentiator. Steve Jobs even said that a number of years ago.

      That is what has me worried about Apple. They have not exactly been standout in their efforst to break new service grounds. Apple Maps, iCloud, Siri, etc are all rather lackluster. Google is putting better services on iOS than Apple is.

      I still hope for big things from Apple, but from where I look they seem to have lost the magic that made them market leaders.
      Emacho
      • The iPad falls within your "few years" timeline.

        And Apple will have grown that innovation to be larger than all of Google by the end of the year (the iPad business is roughly the same size of Google now without the added MMI unit). The amazing thing is, the iPad's break out revenue year will be over the next 1-2 years.
        Bruizer
        • Ok the Ipad has done very well. No disputing that

          but what you overlook is that Android has become a viable alternative. Just like in the phone market, people are moving to Android in greater numbers than they are Apple.

          Apple can still trade on its name and reputation for a while, but if it continues to lack innovation it will continue to lose marketshare and customers.

          There are litterally dozens of tech companies that has break out years like you point to, but have crumbled after failing to innovate and adapt to market changes.
          Emacho
          • And yet...

            Apple is getting 70% of the mobile handset profits, 100% of the tablet market profits and 65% of the laptop profits.

            Apple was about to die when they released the iPod because of plays for sure.

            Apple was going to get killed in the mobile phone market die to WinCE and Symbian. Now you are saying Android.

            The iPad was going to be Apples's great failure.

            Oh, and from what you are saying, Apple will never come out with another new product. Have you ever looked at the historical accuracy of analysts when it comes to Apple. Their record is far below F grade.
            Bruizer
          • Re: And yet...

            ...Apple is releasing less and less profitable products (e.g. the Ipad Mini), leading to the depression of its own share price.

            Not that I understood why huge profitability is such a selling point to the customer: it just means the company's pricing is a ripoff.
            ldo17
          • I don't understand people thinking software socialism is good

            And thinking it is wrong to make a product people enjoy using enough they willing to pay for it VS having a product whose only selling point is it is free.

            And yet, Apple's PE ratio and trailing pE/G is better than all thier competitors. Apple's share price has nothing to due with making less profit because it is making more. What is really funny are people that think Apple makes too much profit but slam the iPad mini due to slight margin compression.
            Bruizer
        • Re: The iPad falls within your "few years" timeline.

          But not the Ipad Mini. That is clearly a rushed product, trying unsuccessfully to compete in a hot new market segment where Android has beaten it to the punch.
          ldo17
          • Unsuccessfully compete?

            By making infinitely more profit than all their competitors? By selling better than all their competitors (not shipped, sold). Android tablets are still a market failure.
            Bruizer
      • I also described Apple between iPod and iPhone

        Apple reved and line-extended the iPod for about 6 years before finally announcing iPhone, but the iPhone changed everything. I certainly won't be holding my breath waiting for the knock-off artists like Samsung to show us the next big thing. That kind of risk-taking isn't in their dna. Apple has the talent and has had the practice.

        Innovation at The Next Big Thing level is much more than follow-on features. The copycats will always be quick to have the longest feature lists. Google et al don't have Apple's vertical eco system and therefore will never be able to match Apple on end-to-end UI/UX. Without the vertical silo, hardware/software integration will always suffer from a greater degree of incompatibility failures and software fragmentation. Apple's model makes better devices.
        jaypeg
      • Why doesn’t anybody copy Apple? - Asymco

        Here's a great follow-on discussion about Apple by Horace Dediu over at Asymco ...

        http://bit.ly/Y5BQSf
        jaypeg
  • Same old song and dance...

    Apple is running into the same issues it has always run into when trying to maintain a proprietary, non-licensed OS: you can never compete against 60 hardware manufacturers offering dozens of variations of products that manage to hit every niche.

    I was a committed Mac user when I was in college until I spent a year abroad and wanted the tinyest computer possible for travel. At that point I bought a Toshiba Libretto and never looked back.

    Today Apple basically produces two flavors of iPhone and that's it. But if you want a smartphone/phablet with a 5.5" screen your only choice is Android. If you want a $50.00 prepaid smartphone your only choice is Android. If you want a waterproof smartphone your only choice is Android. If you want a smartphone with a bulit-in stand your only choice is Android. If you want a smarthone that takes a removable battery or accepts MicroSD cards or has a sliding keyboard your only choice is Android.

    Apple can make a smartphone that will satisfy 60% or users, but collectively the manufacturers of Android devices can create a phone that satisfies 95% of users.
    dsf3g
    • On the contrary, you can compete very well

      because those 60 competitors are all at each other's throats in the low end of the pool over a few pennies, while Apple owns the deep end by itself.
      baggins_z
    • "you can never compete against 60 hardware manufacturers "

      Like making 70% of all mobile handset profits. Close to 100% of all tablet profits (since the competition has to sell at a loss to break even). 65% of laptop profits.

      Is this "competing"?

      I used to use DOS in college. Graduated to Amiga then to NeXT then to Apple realizing the true advantages to a fully integrated systems engineering approach to computer design. Have to use Windows for work so, yes I know much about it. Win7 was good. The others? Not so much.
      Bruizer
      • Is this "competing"?

        Yes - by definition. Unless you want to change the english language to suit the argument of the day?

        Don't be confused with icompeting - you know, your world where apple is just the best at everything and can do no wrong.
        Little Old Man
        • Of course Apple makes mistakes.

          Every company does. From a business standpoint, however, saying Apple is not competing is simply a view from ignorance and not rational. The market share cult believes the only way to success is by getting the largest markets share. Apple see it by creating a great eco-system of products people are willing to pay a premium for even it it means getting less unit market share.

          This has allowed Apple to account for 20% of consumer electronics revenue in the US. It's Apple Retail store outlets are the third largest consumer electronics retailer in the US beating out Amazon.

          You don't have to get 100% market share to make lots of money and compete with extremely viable products.
          Bruizer