Why contract upgrades from Samsung’s Galaxy S3 could help S5 sales


Mar. 12 2014, Updated 7:53 p.m. ET

Perfect timing for Samsung to release the Galaxy S5

In the last article in this series, we argued that the features of the new Galaxy S5 are far from revolutionary. Here, we’ll discuss whether Samsung could challenge Apple (AAPL) in the U.S. smartphone market despite the lack of innovative features in the Galaxy S5.

We believe that although the Galaxy S5 lacks compelling new features, the timing of the S5 smartphone release is perfect. The Galaxy S5 is slated for release in April this year, which means it will give Samsung S3 users the perfect opportunity to upgrade. The Galaxy S3 was released in May 2012, and by May 2014, S3 users’ two-year contracts would be about to expire. Samsung has good relations with U.S. major telecom providers such as Verizon (VZ), AT&T (T), and Sprint (S), which facilitates the sale of Samsung’s smartphones. So we believe existing Galaxy S3 users shouldn’t have any issue upgrading to the Galaxy S5.

Apple is unlikely to challenge Samsung before September this year

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Plus, Apple already launched the iPhone 5S and iPhone 5C in September last year, and it’s unlikely to launch the iPhone 6 before September this year. So Samsung won’t have any major competitor for the next six months, during which time it could gain a lot of ground. According to Comscore, Samsung increased its share in the U.S. smartphone market from 25.4% on average in the three months ending October 2013 to 26.7% on average in the three months ending January 2014. Although Samsung is a distant second compared to Apple’s share of 41.6%, we’ve seen that things change pretty fast in the smartphone market. So it will be interesting to see how many gains Samsung can make in the smartphone market and how much Apple can lose.


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