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Samsung's unveiling of Galaxy S4 heats up rivalry with Apple

The smartphone raises questions about how Apple will respond. One analyst says 'Samsung is making Apple jump through hoops.'

March 14, 2013|By Chris O'Brien and Andrea Chang, Los Angeles Times

Samsung Electronics Co.'s latest smartphone intensifies the rivalry that has developed with Apple Inc., and depending on whom you ask, it also illustrates just how dramatically perceptions surrounding each company have changed.

At a theatrical, over-the-top launch event at New York's Radio City Music Hall on Thursday, Samsung finally debuted the Galaxy S4, a smartphone with a 5-inch screen, eye-tracking and gesture controls. The South Korean electronics giant live-streamed the event — which featured live actors and performers — on YouTube; more than 423,000 viewers were watching as the phone was unveiled.

Samsung's surge the last couple of years has put Apple in the once unthinkable position of constantly being asked how it will respond to things its rival is doing. Will Apple design a phone with a larger screen to match the Galaxy? Will Apple release a cheaper phone to be more competitive in emerging markets in which Samsung is becoming dominant?

"Samsung has clearly hurt Apple," independent technology analyst Rob Enderle said. "Samsung is making Apple jump through hoops. And they're making Apple play on their battlefield."

Those battles can be seen on the advertising front, where both sides continue to escalate their spending.

According to Kantar Media, which tracks ad spending, Samsung spent $401 million on ads in the U.S. last year, pushing past Apple's $333 million. By comparison, No. 3 on ad spending among phone makers was HTC, with a mere $46 million.

Just two years ago, Apple led its rivals in ad spending with $253 million, compared with only $78 million from Samsung.

As a result, there's a growing sense among observers that Samsung currently has the momentum.

Last year, Samsung overtook Apple to become the world's leading seller of smartphones. It did so in large measure through the success in international markets of its Galaxy line of phones that run on Google Inc.'s Android mobile operating system.

Apple investors have grown worried that Samsung is getting the upper hand in the smartphone and tablet markets that Apple almost single-handedly created. Apple's stock rose $4.15, or 1%, to $432.50 on Thursday. But it's down 38% since its September high of $702.10.

According to Bespoke Investment Group, Apple's stock has increased 5,749% since the beginning of 2003. Samsung's stock (which trades on the South Korean stock exchange) has risen just 373% in the same period. But since March 2012, Samsung is up 22% while Apple is down 27%, Bespoke said.

But Brian White, an analyst at Topeka Capital Markets, says talk of Apple being outflanked by Samsung is overblown. He argued that although Samsung has a wider range of phones, the company doesn't make better ones. And he predicted that when Apple releases its next iPhone this year, it will outsell the Galaxy S4 that Samsung unveiled Thursday night.

"I don't expect this to be a game changer," White said. "I think it's an incremental upgrade. I think it's pretty amazing how Samsung gets accolades for all its innovation when all they have is a full portfolio."

The S4, which looks nearly identical to its predecessor, the Galaxy S3, features a hand-waving technology and comes with a 13-megapixel rear-facing camera and full HD screen. It comes in black and in white, is 0.31-inch thick and weighs 4.6 ounces. Samsung said 327 mobile operators in 155 countries will carry the device starting in late April.

For its part, Apple has accused Samsung of ripping off the features and design of the iPhone, spawning a litigation battle over patents that shows no signs of resolution. At the same time, Apple has actually increased its market share in the U.S. to 51% from 45% since the release last year of the iPhone 5, which came with a larger screen than previous versions.

Apple also has been pushing back against some of the negative perceptions that have been growing around it. In his remarks to shareholders in late February, Chief Executive Tim Cook insisted the company is not worried about market share or being the company that sells the most of anything.

"The focus for us is not making the most," Cook said. "We want to make the best. Dell is an example of a company that wanted to make the most PCs. We never wanted to do that."

And on Wednesday, Apple marketing chief Phil Schiller openly criticized Samsung and the Android operating system. He noted that because Android is fragmented across so many devices made by different companies, only 16% of its users are on a year-old version of the operating system and 50% are using software that is 2 years old. Apple, meanwhile, pushes out updates to all users.

"And that extends to the news we are hearing this week that the Samsung Galaxy S4 is being rumored to ship with an OS that is nearly a year old," Schiller told Reuters. "Customers will have to wait to get an update."

But Schiller's remarks were a departure of sorts for Apple, which typically doesn't comment on rivals' moves. For some, it came across as overly defensive.

"Apple is clearly concerned," Enderle said. "You never do that. You never let the world see you sweat."

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