Samsung's recent momentum 'begs an answer from Apple,' Barclays says

Ben A. Reitzes of Barclays issued a note to investors on Tuesday in which he declared that Samsung's momentum, particularly in the mid-tier market, now "begs an answer from Apple." Reitzes' colleague, SC Bae, expects Samsung to successfully launch both the Galaxy S3 mini and the Galaxy Grand in the coming months, while Apple does not have a response in the smartphone segment.

"To say that the Samsung momentum is an issue for Apple is an understatement," Reitzes said. "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."

He believes Apple can recapture some of the momentum lost to Samsung with three objectives: an expansion of Web services, expanding its distribution, and also launching new products.

Reitzes is optimistic that Apple will launch two new iPhone models this year, along with a follow-up to the iPhone 5. Specifically, he believes a lower-cost iPhone will expand Apple's sales in emerging markets like China, while a larger iPhone would combat devices like the Samsung Galaxy Note series.

He expects that Apple could debut a cheaper iPhone in mid-2013, featuring a plastic casing and cost reductions through less flash memory, a lower megapixel camera, and an older processor. He also sees Apple's larger, so-called "phablet" iPhone launching as soon as October.

The same analyst already called on Apple earlier this month to release a big-screen iPhone, sometimes referred to as a rumored "iPhone plus." He predicted a 5-inch iPhone would offset some of the average selling price declines Apple would see from a low-cost iPhone for emerging markets.

As for the flagship "iPhone 5S," Reitzes referenced rumors that Apple plans to add fingerprint authentication to its next handset, thanks to its acquisition of security firm AuthenTec for $356 million last year.

"We believe Apple is a platform company and its next great innovations have to come in the form of software and Web/data services," Reitzes wrote. "We believe these services are needed to keep Apple's ecosystem ahead of the pack and to attract and retain more users."

As for long-running rumors of a full-fledged television set from Apple, Reitzes does not believe Apple needs to build its own large-screen panels. Instead, he believes the company should focus on making the existing Apple TV set-top box device even better.

"The time to wait and 'hobby' is over," he said. "2013 has to be the year for the TV strategy or it risks falling behind in our opinion. There are many opportunities for Apple to release a new vision for a TV ecosystem in the coming months, especially as we approach WWDC."