Apple's Big Rollout: Yawns Today, Brawn Tomorrow?
Sep 11, 2013 5:00 AM PT
Onward and upward, or so the executive suite at Apple is clearly hoping. Tuesday's rollout of the iPhone 5c and the iPhone 5s -- and their related features and design quirks -- came as little surprise to company watchers (yes, there was a fingerprint sensor) as Apple's product pipeline has long been prone to leaks and speculation.
What is less clear, though -- and might continue that way for some time -- is how Tuesday's product rollout fits into Apple's larger corporate strategy.
How do these products appeal to the development community, which Apple must still please even though it is Apple? How will they support, or not, one of Apple's greatest underrated strengths: its sophisticated supply chain? Will Apple finally shake off that persistent meme that it has lost its innovative edge two years after Steve Jobs' passing?
Not to mention the $60,000 question: When will Wall Street show the love again?
Let's start with that last point.
On Tuesday, after the unveiling, the markets basically shrugged, with Apple's stock dropping some 2.3 percent by day's end.
The reason is obvious, suggested Trip Chowdhry, managing director of equity research at Global Equities Research: No one was excited about what Apple had to reveal.
"Make no mistake, these products were very good from a product-management perspective but terrible from innovation perceptive," Chowdhry told MacNewsWorld.
If this were an ordinary product cycle, the market's non-reaction would not be too noteworthy, he continued. After a two-year dry stretch, however, this is clearly no ordinary release.
"Apple had to give us something exciting, but it didn't," he said. "After two years, it is very disappointing."
What we did see on Tuesday "was an excellent example of Apple's product management expertise," Chowdhry noted. That said, "it's time for Tim Cook and the CFO to leave the company," he added. "They need to be replaced by people who understand innovation."
Innovation in All the Wrong Places
Chowdhry's reaction is understandable and does indeed have merit. After two years of no major releases, a period during which Apple fans were teased with visions of smartwatches and iRemotes, they were clearly waiting for something spectacular and are entitled to any disappointment they might feel.
Shareholders, though, should have a less emotional response to Tuesday's show, because digging a little deeper one can see that Apple has indeed been very innovative with its thinking. It is just not quite that obvious yet.
In a lot of ways, what Apple revealed on Tuesday has laid the groundwork for another growth spurt -- but down the road, explained Daniel Ladik, a marketing professor at Seton Hall University.
"I believe that, looking back, we will view this day as the day that Apple turned itself around," Ladik told MacNewsWorld.
The key reason for his claim: The company has set the stage to standardize all of its devices on one screen ratio, which will endear it to the developer community, Ladik said, pointing to the forthcoming iOS 7 release.
The operating system is a radical jump from iOS 6, requiring developers to update all of their apps; it also is optimized for the larger iPhone 5 screen, he said.
"No developer is going to update to iOS 7 for two different screen ratios," Ladik said. "Now is the time, with the major iOS 7 update, to correct this dilemma in the iPhone product line."
The (Half-Hearted) Global Push
What may perplex some shareholders, though, is Apple's cautious approach to the global markets. Even though it has launched its low-end device, it didn't price it low enough to satisfy most consumers in emerging markets.
Apple's Chinese site will be selling the 16GB iPhone 5c for an unsubsidized US$735 -- a price point that "doesn't look as if Apple is willing to greatly sacrifice its margins to take share from cheaper Android hardware," Seeking Alpha reports.
Meanwhile, even though it is being discontinued elsewhere, the iPhone 4 is reportedly still available in China for $420.
Then again, it was never promised that Apple would drop its price to startlingly low levels. The company still has its brand image to maintain, which will mean a higher-than-average price point.
Fortunately for Apple, despite its slow two years, the company is still sitting on a cash hoard, and with the release of these products can expect to bring in even more capital. Squeezing out margins is not the point -- setting itself up for the long-haul, though, is.