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April 29, 2013

A 'Compact' 4.3-inch Galaxy S4 - Now that Could be an Apple iPhone Nightmare

Last week, in discussing Samsung's earnings, we also had to note that Samsung is going to deliver new ruggedized versions of its Galaxy S4 and larger Galaxy Note tablets. We also now need to note that Samsung is preparing to deliver a Kindle, Nexus and iPad mini challenger, a low cost device with limited technical specifications that will be delivered at a bargain basement price. It will add this to a lineup that is also likely to consist of ridiculous 6- and 6.3-inch smartphones. What's notable about all of these devices is that they do not in any way, shape or form challenge Apple, the iPhone or the iPad.

In fact, as much as Samsung is striving to deliver a product into every possible mobile market niche on the planet - a sort of “throw everything on the wall and let's see what sticks” approach to product development - none of these are going to change any market dynamics. Samsung's markets will remain its dominant low end Android market (though this is a market that’s becoming much more competitive) and the high end, with "large screen" smartphones continuing to take up market share while the large screen fad continues to move forward (we'll leave our underlying suggestion through the use of the word "fad" to float there).

Now, back when Samsung introduced the Galaxy S4 in all of its 5-inch glory, we underscored that Apple is no doubt delighted by the S4. It offers only derivative innovation (most of it centered on a collection of apps rather than hardware, and well…it's huge). To be fair, the device is certainly packed with many new sensors as well, but at the end of the day there isn't anything about the S4 that drives innovation forward in truly new ways. Finally, mobile analytics vendor Flurry released a recent report that strongly suggests large screen smartphones (including hybrid devices such as Samsung's Note II) are nothing more than a "fad."

We've also pointed out elsewhere our intense belief that "large screen" will never be part of Apple's smartphone DNA, and with enormously good reason. All of the above suggests that Samsung is following the wrong path to innovation. And it suggests that Apple has opportunities ahead of it in 2013 to remain locked in as the world's most innovative mobile company. But what if Samsung was able to deliver the same exact Galaxy S4 – by which we mean one sporting the same quality screen and all the same internal sensors and gadgets – in a package approaching the iPhone 5 in size and weight?

The Compact 4.3-inch Galaxy S4

The same source that has leaked the possibility of Samsung delivering ruggedized devices has also suggested that Samsung is set to launch a compact version of its Galaxy S4 – one that would measure just 4.3 inches – in July. What isn't clear yet is whether or not this device would deliver the S4's level of features and functionality or if it would be a vastly downsized offering in both size and feature set.

Samsung has gone down this road before with the Samsung Galaxy S III Mini. But this was a stripped down affair that was an S III in name only – with significantly inferior specs, including a low screen resolution that no iPhone user would possibly consider.

We've long suggested that, had Samsung looked to deliver a true flagship product much closer in size to the iPhone 5, then Apple would very likely be in danger of losing non-trivial market share – by which we mean that Samsung would very likely be able to convert a significant number of iPhone users. A true S4 in a 4.3-inch package would be a nightmare for Apple, especially if Apple was not able to drive any truly new innovation this year.

Contrary to current popular belief amongst many industry pundits, size does indeed matter, as they say, but the size that matters is the iPhone 5's size, not the 5-inch monster S4's size. We've refused to cover the possibilities of Samsung delivering 6- and 6.3-inch versions of its smartphones, simply on the basis of such devices being absurd and having extremely limited markets.

But the marketplace becomes significantly less absurd if Samsung can indeed deliver a true and equally feature-laden S4 in a 4.3-inch size. Had Samsung announced a 4.3-inch S4 on its launch date and was now ready to deliver them into the market, we would have significant concerns for Apple's current position. Suffice it to say that Apple would not be taking any delight in the S4 if this was the case. It would have proven to be an Apple nightmare, leaving Samsung with a minimum of six weeks between the beginning of May and Apple's 2013 World Wide Developer Conference (WWDC) in June to sell a real "iPhone killer" device into the market with no response from Apple.

With the stage now set for Apple to deliver exciting new innovation at WWDC, it will effectively blunt and block anything Samsung might have been able to do with a 4.3-inch S4. We believe we can classify this as Apple dodging a very dangerous bullet.

As Apple continues to hone its best of breed approach, Samsung should take a long look at its current product management strategy. Throwing everything up on the wall and watching what might stick isn't product management, it’s a crapshoot. And a crapshoot isn't going to win the day going up against Apple.

There is no doubt that Samsung will sell a lot of devices for the rest of 2013, but its approach won't have done anything to pre-empt Apple going into the 2013 buying season and into the first half of 2014. Apple's turn to pre-empt Samsung is now coming up.

We hope that CEO Tim Cook has his team primed for a huge burst of creativity and true "raise the bar" innovation.

Edited by Alisen Downey

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