Samsung’s new Galaxy S4 may not be a game changer (with some reviewers calling it "meh" and "completely amazing and utterly boring.") But the smartphone may have just enough new features to lure over iPhone users and steps up the pressure on Apple CEO Tim Cook and his team to deliver a groundbreaking new phone this year.
That’s the consensus of Apple analysts after examining the new Galaxy S4, introduced with a lot of fanfare yesterday at a Samsung event at Radio City Music Hall. Here’s a round up of their thoughts on the competition between Samsung and Apple, smartphone innovation and the what they believe Cook needs to do next.
Brian White of Topeka Capital Markets. “Samsung introduced some interesting new features in the Galaxy S 4 many of which we expect newer smartphones to include as the year unfolds. As such, we view the Galaxy S 4 as a refresh but NOT a game changer. We believe the iPhone 5S will handily outsell Samsung's new flagship smartphone in the second-half of the year, while we believe Apple will expand its world with a lower-priced iPhone in 2013…We consider the iPhone 5 a work of art and Apple's ability to deliver a device that came with a larger screen (4-inch vs. 3.5-inch) versus the 4S but one that was 18% thinner and 20% lighter was a monumental task. By comparison, the Samsung Galaxy S 4 is 5 inches vs. 4.8 inches for the Galaxy S 3 but only 8% thinner and 2% lighter. At the same time, the iPhone 5 is 4% thinner than the Galaxy S 4 and 14% lighter. With the iPhone 5S expected to launch this summer, we believe Apple has the potential for even further improvements in this department. Also, polycarbonate (i.e., plastic) casing of the Galaxy S 4 is still no match for the aesthetics of the iPhone 5 with the aluminum unibody enclosure.”
Gene Munster of Piper Jaffray. "The Galaxy S4 appears to be largely an incremental update to the S3 including a slightly larger screen (4% larger on diagonal), better camera and processor, and updated software, but largely the same body style and casing. We believe some of the software features are unique, including the tilt to scroll, video pausing based on facial recognition, and hand gesture based interactions, but view these software improvements as minor compared with what Siri was to the iPhone 4S or even Google Now to Android… Despite the launch and fanfare around the Galaxy S4, we continue to believe that Apple will maintain a low 40% market share in the high-end smartphone market in CY13. We note that Android, and Galaxy specifically, has closed the gap with the iPhone in terms of software and in some cases hardware. We believe Apple will launch an iPhone 5S, which will include improved specs and some new unique software features, but will not be a redesign. We still believe that even without a redesign, the iPhone 5S potentially in June will enable Apple to reaccelerate unit sales from March.”
Aaron Rakers of Stifel. “Samsung released the Galaxy S4 at a polished event in New York on Thursday evening. We believe that the display, the camera, the software and several unique features ups the ante in the smartphone market… The iPhone 5 has a screen resolution of 1136 X 640 pixels and 326 ppi. The S4 has a screen resolution of 1920 X 1080 pixels and 441 ppi. The screen size of the iPhone 5 is 4 inches compared to 5 inches for the S4. The iPhone uses a 1.3 GHz dual-core processor compared to a 1.9 GHz quad-core or 1.6 GHz octa-core processor for the S4. The iPhone only has a 8 MP camera versus 13 MP for the S4. Finally, the iPhone 5 weighs 3.95 ounces versus 4.59 ounces for the S4.”
Ben Reitzes of Barclays Capital. “The GS4 seems largely as expected – and there could be some relief for Apple (certain versions of LTE won’t be available until later this year)...[But] to say that Samsung’s momentum is an issue for Apple - is an understatement. Not only is Samsung helping its own cause, but its success 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. However, Apple seems rather silent of late – and could be waiting even longer to make any competitive response outside of potential adjustments to pricing…We believe Apple is currently making moves that include international expansion, new iPhones and eventually a bigger screened phone in 2014. In mid 2013 we expect the company to introduce both a lower cost (but high quality) iPhone 5 with a plastic case as well as an ‘iPhone 5S’. Even before that launch, we could see further international expansion for the iPhone. Later this summer, we expect the lower end iPhone to be available globally but be more popular in emerging markets. This product should be priced in the mid tier range – likely at the higher end of the $250-$350 price band. If Apple is to rebound in terms of share, we believe that advances to the ecosystem will be the reason – with potential innovations around payments.”
Stuart Jeffrey of Nomura. “Our concern is whether or not Apple’s management changes have disrupted the company’s ability to materially advance iOS with the likely release of iOS7 in June. Our checks (i.e., our Asian counterparts who cover some of the Apple supply chain) also suggest that the company is not working on a 4.5” to 5” device for launch in 2013. If correct then Apple’s competitive position in fast growing emerging markets could continue to wane, and Samsung may become a bigger threat still in Western markets… In the short-term, we do not expect Apple to respond with a change in pricing or distribution. However, it is clear that Apple is missing an opportunity with larger screen devices as well as in emerging markets. The real test for Apple, in our view, is how quickly management can accept the changes in market dynamics, adopt a more pragmatic product strategy, and accelerate product development schedules to meet the new competitive threats head on.”
Steven Milunovich at UBS. Our initial impression of the new S4 was positive. The device’s 5-inch HD Super AMOLED display is most impressive with very high pixel density. The bevy of new specialized software and aggressive performance step-up should play well with prosumers and increase Samsung's competiveness at the high-end. Pricing for the device remains to be determined and official release is slated for late April…The S4 introduction continues the drumbeat of negative news [for Apple]. Potential good news, however, could include (1) an increase in the buyback/dividend, we expect in the next two months, and (2) the increase in China Mobile’s capex to $31bn this year in support of a 4G network that suggests coming support for the iPhone.”
Peter Misek of Jefferies. “We believe the S4 will certainly sell well and it is incrementally negative for Apple; however, the device is not revolutionary, in our view. Aside from the large screen size, which we believe gives Samsung a large advantage over Apple, we believe many of the features can easily be replicated. Additionally, a major complaint amongst Galaxy users is that they do not like Samsung's customized software, especially when it is a downgrade in performance from stock Android features. We await to see the real world performance for the many new features.”
Shaw Wu of Sterne Agee. “With Apple shares off nearly 40 percent from its 52-week high, many investors have asked our take on the state of affairs at the company. Unsurprisingly, we continue to see cuts to iPhone build plans as demand has turned out weaker than expected but more importantly, what appears to be likely an inventory drawdown ahead of iPhone refreshes in the second half [of the year]… We continue to believe Apple is leaving money on the table by not participating in larger touchscreen form factors dominated by Android vendors. But more importantly, we believe Apple needs to reclaim high-end leadership as that is what its brand is about. In our supplier checks, we are seeing evidence of a larger form factor iPhone being worked on but given its early stage, we don't believe we will see it ship until 2014."
What do investors have to say? Apple's shares rose $11.16, or 2.7 percent, to close at $443.66 in Nasdaq trading.
