New iPhone: What could go wrong for Apple today
By Hayley Tsukayama,
It’s hard to argue with Apple’s success. It’s the most valuable company in the world; its profits are through the roof; and it has a devoted following that borders — let’s be honest — on fanatical. (For proof, see the meme-driven “Things” Apple Fanatics Say, parts one and two. Then tally up how many of those phrases you’ve heard ... or said.)
The company is expected to once again impress the industry and its fans by announcing a new version of the iPhone today, which will likely rake in sales when it hits the market. But let’s play devil’s advocate for a second. There might be some flies in Apple’s ointment.
First, the U.S. smartphone market may be too mature for Apple’s newest phone to have the kind of major success on the scale of previous iPhones, says Stephen Baker of the NPD Group, which measures the U.S. market. Baker wrote Tuesday that the new iPhone may not sell as well as in the past now matter what its updated hardware is like.
He cited an NPD study announced last month that found that the smartphone market grew 9 percent in the second quarter, compared with the same time last year. Those gains, the study found, were in the pre-paid market, and the figures showed no growth for smartphones on contract.
“The iPhone 5 will launch into a U.S. smartphone market with very different dynamics than the launch window of the iPhone 4 or the iPhone 4s,” Baker wrote. “And these dynamics have nothing to do with the strength of the new product offering, its hardware configuration, its marketing, or even its competition.”
He also noted that iPhone 4S owners will likely stick with their current, two-year smartphone contracts. That means that Apple will be selling mostly to those who don’t have smartphones but haven’t opted for the pre-paid model, customers who have smartphones from Apple competitors, and people who want to upgrade their iPhone 4 or iPhone 3GS.
Finally, Baker said, Apple had funneled a lot of its market share from “weakened competitors” — Baker is likely referring to BlackBerry maker RIM and possibly Nokia — and that Apple now has to woo consumers away from much stronger brands.
“Apple will have a highly successful launch, of that there can be no doubt,” Baker wrote. “But the inevitability of easy market share gains in the U.S. is not quite so apparent this time around, as it has been in the past.”
Even with the hedges, Baker’s views about the new phone’s future are in the minority. Several analysts expect the company to continue to break its own records with iPhone sales. So far, according to Apple marketing executive Phil Schiller, each new generation of the iconic smartphone has sold about the same number as all previous generations combined.
Fortune’s Philip Elmer-Dewitt brought up another point in his response to Baker’s post. Initial sales of the iPhone depend a lot on how many countries Apple includes in its first launch day, since potential smartphone growth is much stronger overseas.
The market picture aside, there’s another potential fly in the ointment: What if this newest iPhone doesn’t live up to expectations? After the iPhone 4S launch, analysts said they were “underwhelmed” by the upgrade, even with the addition of the Siri voice assistant. And while consumers snapped up millions of the Siri-enhanced smartphones, there was plenty of disappointment among those in the small but critical techy market who wanted Apple to be more innovative with that version of its iPhone. Those hopes are even higher for what’s expected to be announced today.
Phone upgrades such as a larger screen and LTE capability can help Apple hold onto the market, but the company has its best shot at shaking things up by offering a major hardware redesign or adding in a new and compelling content service.