Apple Inc. (AAPL) Has Samsung to Thank for Today’s Rally

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Here’s something you don’t see every day: Apple Inc. (NASDAQ:AAPL) posting strong gains while the market lags. Days like this have been few and far between over the past several months. Who does Apple Inc. (NASDAQ:AAPL) have to thank for this rally? Samsung.

Wait, what?
The South Korean conglomerate unveiled its newest Galaxy S4 last night at an enormous media event in New York City. The debut has been one of the most widely anticipated consumer product launches in months, as Samsung has been very aggressively building hype for the device primarily through an unrelenting marketing campaign that ensures the word “Galaxy” is never far from the consumer eye.

Galaxy S4. Source: Samsung.

Much like the iPhone 5, the Galaxy S4 didn’t have any major surprises for consumers and investors, as quite literally all details were leaked in advance in some form or fashion. Both devices are now the current flagships for each respective company, and will garner their fair shares of smartphone sales over the coming months.

The reason why Apple Inc. (NASDAQ:AAPL) investors are feeling confident today is that the Galaxy S4 may not be able to live up to the hype. That’s the downside of an overt attempt to artificially drive anticipation, since it can potentially lead to feelings of disappointment. The Galaxy S IV simply isn’t as big of an improvement as Samsung had led us to believe it would be.

Only Apple can pull off an Apple
There have been countless ways that Samsung has been copying Apple in recent years, and the Galaxy S4 is indicative of yet another way: incremental upgrades. Over the past six years, Apple Inc. (NASDAQ:AAPL) has very successfully implemented a tick-tock strategy with iPhone upgrades, borrowing the strategy from Intel Corporation (NASDAQ:INTC)‘s arsenal.

The Cupertino company alternates major redesigns with incremental improvements each year. The most impressive part? This strategy simply shouldn’t work in the high-flying and cutthroat smartphone market. In a world where most smartphone designs become dated in a matter of months, Apple Inc. (NASDAQ:AAPL) is able to milk two years from a single external design without consumer fatigue. Apple has been able to execute this through a combination of higher build quality, robust app content, brand strength, and software differentiation.

Samsung, on the other hand, is still mostly a commoditized Google Inc (NASDAQ:GOOG) Android OEM. It has less strategic leverage to pull off such a move, as there is an army of OEMs lining up behind it all eager to take the Android crown. “Differentiated” software layers like Samsung’s TouchWiz will only go so far, though Samsung’s sheer size and marketing budget has become an important competitive advantage. After all, not every OEM can roll out to 327 carriers in 155 countries around the world in a matter of months.

Still, the market’s tolerance of incremental upgrades will be much lower for a commoditized player relative to a differentiated company, and investors are optimistic that Samsung’s new threat won’t be as significant as feared.

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