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CommentaryApple

How the new iPhone could save Apple

By
S. Kumar
S. Kumar
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By
S. Kumar
S. Kumar
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August 31, 2015, 6:00 AM ET
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Apple is expected to unveil its latest device, the iPhone 6s (or 7), on September 9 in what should be a sigh of relief for investors, who have had a tough ride this week. Despite CEO Tim Cook’s assurance that China’s economic difficulties should not adversely impact the tech giant’s sales, the company’s stock is still trading below its $115 a share level just a few weeks ago, even after the robust market rally on Thursday, and far below its 52-week high of $134.54 a share.

At least some of the market punishment seems unique to Apple (AAPL). Investors are worried about the company for many reasons, including competition from low-cost Chinese smartphone makers and only modest traction for Apple Music and Apple Pay.

Which is why the new iPhone is crucial for Apple to restore investors’ confidence, and there’s a good chance it will for several reasons.

The phone will have a 12 megapixel camera, a big increase from previous versions; 4k video recording; faster processing speed; longer battery life, which many users consider to be an extremely important feature, according to multiple studies cited by Tech Insider; animated wallpaper like the Apple Watch and Android phones; the ability to detect when a Wi-Fi network is weak and automatically switch to cellular; and Wi-Fi calling over AT&T, previously limited to T-Mobile.

But what’s expected to be the most important new feature of all: force touch, a technology that enables a device to distinguish between light and strong taps by a user and assign different functions to them, as it currently does on the Apple Watch and MacBooks. Applied to the iPhone, this could potentially be the killer feature that solidly differentiates the new iPhone from its predecessors by enhancing ease-of-use and utility.

 

An improvement to the user experience has always been at the heart of Apple’s success with new models and the force touch feature can provide this. Force touch is also new enough to encourage buyers to replace their existing phones, a major driver of sales in in China, one of Apple’s key markets. Force Touch should also help Apple maintain its position in the Asian market, where competitor Huawei is reportedly introducing a similar feature to its smartphones.

Another factor working in Apple’s favor is that while the company may have a hard time outdoing its blockbuster sales for the iPhone 6, new equipment installment plans from wireless carriers might encourage adoption for the new iPhone by consumers. An increasing percentage of AT&T (T) and Verizon (VZ) customers have been opting for these plans, which don’t tie them down to two-year contracts and allow them to upgrade early.

Sanford C. Bernstein analyst Toni Sacconaghi estimates that about 14.9 million U.S. customers will be eligible for upgrades at the end of this year, compared to 5.3 million last fall when the iPhone 6 launched, according to The Wall Street Journal.

Finally, even though Apple continues to trail Samsung in terms of worldwide smartphone sales, which fell in the second quarter of 2015, Apple’s market share rose to 14.6% from 12.2% a year ago, while Samsung’s declined to 21.9% from 26.2%, according to research firm Gartner. In China, too, Apple’s iPhone sales grew by 68% last quarter to 11.9 million units, indicating that the company is making inroads in that market despite its challenges. “It’s a big brand and people really associate that with their status and it’s kind of an aspirational brand so many of the consumers in China expect to own an iPhone at some point of time,” says Gartner research director Anshul Gupta.

Some words of caution here. Apple’s new product launches are always surrounded by hype and predictions that don’t always come true. It remains to be seen how good the final product will be and, of course, how many people will buy it. In addition, analyst expectations could be inflated, as they were last quarter, setting Apple up to disappoint Wall Street even with a great smartphone.

Nonetheless, given the importance of the new iPhone as investors add pressure on Apple’s stock, it’s a safe bet that the company is going take this particular launch very seriously. Stay tuned for September 9th.

S. Kumar is a tech and business commentator. He has worked in technology, media, and telecom investment banking. He is not an investor of Apple or any companies mentioned in this article.

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