iPhone 5 Opens the Door for Competitors
Douglas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
At the risk of putting my head in the proverbial lion’s mouth, or of signing up for a barrage of hate mail from the Apple (NASDAQ: AAPL) faithful, the release of the new iPhone 5 was not the type of giant leap forward that we have come to expect from Cupertino.
While there is plenty to be impressed about with the new device, and plenty of market prognosticators are predicting historic sales heading into the end of the year, the iPhone 5 brings Apple up to speed with competitors, not beyond them. The real winners of the day, therefore, must be Google (NASDAQ: GOOG) and Microsoft (NASDAQ: MSFT). The prudent investment decision is to give the market a few days to digest the news, but at initial glance, the smartphone wars have just gotten more interesting.
iPhone 5 Highlights
The iPhone 5 is not without its share of upgrades that will clearly distinguish it from earlier versions. Some of the top improvements include:
4G LTE Capability – the iPhone 5 will be the first device from Apple that runs on the world’s fastest wireless network protocol. While this feature was a must have, its biggest impact will likely be on top carriers, AT&T (NYSE: T) and Verizon Communications (NYSE: VZ), as they battle for network dominance. Where AT&T has dense urban networks, offering greater speed, Verizon has a wider coverage area that is available to more people. How this factor is received by consumers will be one of the most critical results of the launch.
Updated Form Factor – The new iPhone 5 is the first iPhone to offer a 4-inch screen. It is also the thinnest phone available on the market and is lighter than its predecessors. The new phone abandons Apple’s old 30-pin connector, in favor of a new faster version; an adapter is available to allow the new phone to run existing peripherals for $29.
Faster Chip – In the 6th generation, Apple has moved to an A6 chip that is much faster at running all the basic features of the phone. To showcase the phone’s new speed, Siri is now able to function inside of more apps, and features like Facebook are more integrated. Apple Passbook, the digital wallet solution included in the phone, will also take advantage of the phone’s power. Partners including Starwood Hotels have already endorsed the app and plan to work on accepting it at all locations.
Better Battery Life – This may be a critical differentiator for Apple. LTE downloads are known to be power-hungry, meaning battery life is a critical feature for user enjoyment.
While there are other features, those above are those most notable and central to the launch. Putting each into context should help us to give a more critical opinion of the new best-phone-ever.
What We Really Got
While the above features are impressive in a very real sense, they are simply insufficient to motivate rational people to upgrade ahead of their normal contract cycles. The move to 4G LTE is a great and necessary improvement, but Android phones have been running on LTE for over a year. While we can all respect the position that Apple wanted to make sure the LTE network was sufficiently robust and that the phone could properly leverage its power, bringing an LTE phone to market is not big news. A failure to make this step forward would have been catastrophic news for Apple; getting it done is not exciting.
Turning to the form factor, a bigger iPhone is great, but not taking the world by storm. Some will argue that by not going to the full size of the Samsung Galaxy line, Apple went too small again. Others, me included, prefer a sleek phone over a mini tablet attached to my ear. Regardless of the camp you find yourself in, the size of the phone is a positive, but not a game changer. Furthermore, as to the iPhone 5 being 18% thinner and 20% lighter, given the reality that nearly every user protects his or her phone in a clunky case, these considerations are somewhat irrelevant. This is not a reason to upgrade.
If there is an outright negative about this launch, it is the new connector. While it may be faster, more efficient and more durable, this seems like another typical Apple nickel-and-dime job. For anyone that has faithfully stayed in the iFamily to have to shell out $29 to avoid buying new chargers, speakers, etc. is less than what we should expect from an industry leader, but what we all expect from Apple. Why not include a few with the phone – the incremental cost to Apple would be significantly outpaced in the goodwill it would create.
While I am sure there are some who need the enhanced speed that the A6 chip provides, I do not believe there is an outbreak of angry iPhone 4S users who cannot bear how slow their phones run. The uptick in speed may be pleasant, and is certainly something to chide non-iPhone 5 owners over, but it is not a critical upgrade for most users. Overall, the new iPhone 5 seems like an improvement, not a leap forward.
The New Landscape
The new iPhone has plenty for consumers to be excited about, but not so much that it will redefine the market as past versions have done. The lack of a big win for Apple is, therefore, a win for Google and Microsoft. Apple will make plenty of sales, without question, but Google and Microsoft will remain squarely in the fight. As an investment matter, holding existing positions and not initiating new ones, should give the market time to more thoroughly digest the new iPhone. On the news alone, Apple is a hold for the next several trading sessions.
Mr. Ehrman has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
