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Apple Inc. (NASDAQ:AAPL) Needs to Deal with this Threat in right away.To say that the Samsung momentum is an issue for Apple is an understatement, according to analysts at Barclays research, who recently issued a new research note. Hedge funds have been aggressively selling Apple Inc. (NASDAQ:AAPL) during Q4.  Analysts at Barclays believe that not only is Samsung helping its own cause, but its success catalyzes Android as well. As a result, they “need to see” Apple expand its iPhone market this year in a big way – and improve its platform.

Barclays analysts believe that Apple Inc. (NASDAQ:AAPL) seems to be making moves that include international expansion, new iPhones and eventually a bigger screened phone within a year’s time. In mid 2013, Baclays expects expect the company to introduce both a lower cost (but high quality) iPhone targeted at emerging markets as well as an ‘iPhone 5S’. Even before that launch, they could see further international expansion for the iPhone with NTT Docomo in Japan (60 million subs).

Later this summer they expect a lower end iPhone targeted to come with a plastic casing and some lower cost options in terms of the amount of flash memory, a lower megapixel camera and an older processor. This product should be priced in the mid tier range – likely at the higher end of the $250-$350 price band. With regard to the 5S, Apple would be reusing a previous platform and leverage the manufacturing efficiencies it has finally gained with the iPhone 5. The key feature of the 5S needs to be finger print authentication – which could eventually be used in a secure payments system. Along with the release of new phone models, the analysts believe that the iPhone is set for further expansion in Asia with the iPhone finally available with China Mobile (700 subs) by the end of the September Quarter.

Furthermore, fespite recent comments from Tim Cook defending the 4” form factor, Apple realizes it must address this category of phones – and broaden its product line to include a 5” model or something like it. Barclays expects a 5” ‘iPhablet’ could be ready for shipping in October to March 2014 timeframe. Any Apple ‘Phablet’ would likely be priced at a premium and include a top-of-the-line display, helping its iPhone ASP’s buffer the impact of a lower end model. Apple Needs Platform Innovation Since iTunes is Losing Some Momentum Even more than the new hardware– Apple Inc. (NASDAQ:AAPL) needs to create excitement around its platform again.

Apple Inc. (NASDAQ:AAPL)’s 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.

Barlcays analysts believe that younger users may not be as inclined to build massive iTunes libraries – and prefer a subscription model for content. Barclays  thinks that 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 Inc. (NASDAQ:AAPL) might make sense as well (the Pandora App for iOS is quite pleasant). They 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.

Barclays believes that Apple at its core is a “platform” company and its next great innovations have to come in the form of software and web/data services. The analysts believe these services are needed to keep Apple’s ecosystem ahead of the pack and to attract and retain more users.

Furthermore, the analysts think that Apple needs to up its game in web services and platform integration. They are hoping to see the seeds of this innovation when the company previews iOS 7 as early as March in an iPad launch event. They believe that Apple Inc. (NASDAQ:AAPL) can turn perceptions of its platform around with a real move into payments, an integrated iOS-led television service and improvements to iCloud (including subscription-based services). A move into payments could be augmented with technology acquired from Authentec (acquired in July, 2012), making Apple’s hardware and services the most secure of all handset makers – and down the road Apple could add Apps within iOS that link to banks and even marketers for couponing and promotions. However, don’t expect to hear anything around payments for Apple users until the summer at the earliest.

However, the analysts are hoping that Apple can provide a useful update to Apple TV that enhances its platform. With regard to television, Barclays believes that Apple can link iOS and Siri better to the media experience – leading to the best integration (Samsung impressed us with its recent SmartHub vision, but think that Apple Inc. (NASDAQ:AAPL) has the potential to make it work even better if it moves fast).

The “TV call” for Apple is clearly too focused on hardware and not enough on the ecosystem and what customers want. The focus on “TV” misses the point. Apple doesn’t need to make a TV screen – they need to make the Apple TV “hockey puck” better. The company at the very least must stake its claim on the “hub” concept that takes the best of an iPad, enhances it and merges it with a new screen – a television.

The analysts think that Apple Inc. (NASDAQ:AAPL) will follow suit with software and TV integration—and it needs to do so more quickly now. The time to wait and “hobby” is over. 2013 has to be the year for the TV strategy or it risks falling behind. There are many opportunities for Apple to release a new vision for a TV ecosystem in the coming months, especially as we approach WWDC.