Apple’s iPhone 5 plays it safe but will still win big, analysts say

Apple raised the curtain on its long-anticipated iPhone 5 on Wednesday, unveiling a design similar to past models that analysts nonetheless predicted would continue the company’s otherworldly success.

Executives touted 200 enhancements — a much bigger screen, a slimmer profile, and numerous improvements to the iPhone’s software and performance. That disappointed some financial analysts who said the phone only kept up with the growing competition in the smartphone market.

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How the iPhone 5 stacks up against other smartphones.
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How the iPhone 5 stacks up against other smartphones.

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But few doubted it would be a hit. “It’s the same phone but sleeker,” said Sterne Agee analyst Shaw Wu. “They arguably could have done more, but — as the saying goes — if it ain’t broke, don’t fix it.”

The influence of the device, which generates more than half of the company’s profits, is clear to Wall Street. As Apple executives spoke, shares of related companies rose or fell, depending on whether the iPhone 5 boosted their prospects or signaled an ominous move into their spaces.

The streaming-music service Pandora saw a sharp jump when Apple didn’t announce that it would offer a similar service, as had been rumored. Changes to Apple’s earphones sent shares of headphone-maker Skullcandy down 4.5 percent.

Similarly disruptive were Apple’s updates to its mobile software, now called iOS 6. Apple touted a new maps program with turn-by-turn directions, a development that could be fatal for GPS-makers and is aimed squarely at Google’s popular map program.

At the company’s presentation in San Francisco, which was covered obsessively by scores of bloggers and reporters, chief executive Tim Cook again acted more as a master of ceremonies than a keynote speaker, a departure from the style of Apple’s late co-founder Steve Jobs, who died last fall. Absent, too, was talk of the intersection of liberal arts and Apple’s heavily designed technology, a point on which Jobs often liked to expound.

That mantle increasingly seems to be taken up by one of Apple’s major rivals, Amazon, whose chief executive, Jeff Bezos, spoke more broadly about the marriage of media content and technology last week as he introduced Amazon’s latest tablets.

“There are a lot of things they could have done, especially with competitors trying everything,” said Al Hilwa, an analyst for International Data Corp. “But they’re not going to do something unless they can do it in a decisive way.”

The iPhone 5’s combination of tweaks is enough, analysts said, to keep its market share steady as the company faces tougher competition in an increasingly crowded smartphone market.

The design addresses several complaints from customers that Apple had fallen behind competitors such as Samsung and HTC. Wu, the Sterne Agee analyst, said a larger screen and the ability to connect to high-speed 4G LTE networks were critical improvements.

The screen is now four inches, measured diagonally, up from 3.5 inches. Apple executives also touted the iPhone 5’s new dimensions (18 percent thinner than previous models) and weight (20 percent lighter), with Phil Schiller, the head of marketing, calling it “a thin and light, jewel-like device.” The phone has less glass and a new metal back.

The executives noted the phone’s new connector, which could force owners of previous iPhone models to buy new chargers, alarm clocks and other third-party devices if they want to upgrade. Apple also plans to sell an adapter.

Also intriguing were the company’s updates to its iPod music players, which propelled Apple back to profitability more than a decade ago. Its high-end model, the iPod Touch, was enhanced with faster processors, a slimmer profile and the ability to display images on televisions, making it a threat to the digital-camera industry as well as gaming consoles. The device can also receive video calls over a wireless Internet connection and send text messages, making it the closest thing to a smartphone without a cellphone bill. 

Apple’s changes to its iTunes store, which give the service a cleaner layout, will make it easier for consumers to add music and movies to their Apple accounts, officials said.

The new iPhone will start at $199, and the price of the iPhone 4S will drop to $99 with a two-year contract. Apple’s iPhone 4 will now be free with a contract on AT&T, Verizon and Sprint.

Apple’s stock seesawed between gains and losses but was up about 1.4 percent in regular trading and topped $670 per share after hours.

 
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