The analyst notes, for instance, that Samsung has launched a pair of successful mid-tier smartphones - the Galaxy S3 Mini and the Galaxy Grand - and asserts that Apple needs to move into that market by the end of the summer to stay competitive. "To say that the Samsung momentum is an issue for Apple is an understatement," he writes. "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."
Reitzes thinks Apple can recapture some momentum by expanding its Web services, broadening distribution launching new products. He says The company seems set to release the iPhone with new carriers, in particular NTT Docomo and China Mobile. "In addition, we expect Apple to have a steady stream of hardware announcements this year, including a lower cost iPhone that can expand its market," he writes. "We expect two new models of phones this year with a phablet that could be launched in the October to March time frame."
He also thinks Apple could provide first look at iOS 7 as soon as March; he thinks the company is going to hold an event to unveil the next set of iPads.
Meanwhile, Retizes also frets that the company could be losing an edge with what has been a key asset: online services.
"Apple needs to create excitement around its platform again," he writes. "Its Maps application is still far inferior to Google’s and ever since that mistake – the Apple ecosystem has been under attack by investors. Lately more Android users have been able to replicate iTunes libraries using apps like Double Twist and find that email is obviously easy to migrate since many use Gmail. We believe that younger users may not be as inclined to build massive iTunes libraries – and prefer a subscription model for content. We think it is about time Apple entered the music streaming business. Google’s YouTube is actually a leader here too – and Apple has arguably fallen behind competitors like Spotify and Rdio in streaming music. Although Pandora has had some troubles, a music discovery service from Apple might make sense as well (we think the Pandora App for iOS is quite pleasant). We anticipate Apple will need to integrate a music and more refined media streaming service with iTunes at some point in order to make it easier for youth to be part of iOS."
The analyst adds that he thinks Apple turn perceptions of its platform around with a "real move" into payments, an iOS-led television service and improvements to iCloud, including subscription-based services.
AAPL is down $2.47, or 0.5%, to $457.69.
