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iPhone 5: If You Want An Evolution

9/17/2012 12:00:00 AM Eastern

NEW YORK – The iPhone 5 is an evolutionary product rather than a revolutionary product, according to analysts, but they expect the device will make it possible for Apple to regain some U.S. market share in the next few quarters.

 
Many current iPhone users had been delaying the purchase of a new iPhone until the iPhone 5 became available, analysts explained. 
 
The launch will also help boost Apple’s smartphone share in the coming year because the iPhone 5’s improvements — including a larger 4-inch screen, 2x faster processor, thinner chassis, 4G LTE and HSPA+ 21Mbps cellular technology, and next-generation iOS 6 operating system — erase many of the feature advantages enjoyed by many Android rivals, analysts added. 
 
Share gains, however, could be tougher for Apple to achieve than in the past, at least one analyst believes. Apple will enjoy “great success” in the U.S. with the iPhone 5, but it will be much harder this time around to “achieve the equivalent blowout sales success that the iPhone 4S enjoyed,” said Stephen Baker, The NPD Group’s telecom industry analyst. 
 
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,” Baker said. The reasons include flat post-paid smartphone industry sales preceding thisyear’s iPhone launch compared to significant smartphone sales growth that preceded previous iPhone launches. Another reason is that “there is no clear No. 3 [operating system] player to steal market share from,” Baker said.
 
“iOS and Android have such dominant share that, as with brands, growing faster than the market will increasingly require taking share from a much stronger competitor, as opposed to merely vanquishing those who are already falling by the wayside,” Baker explained.
 
Likewise, Apple faces a stronger competitor in Samsung this time around, he continued. “The iPhone, as well as Samsung’s phones, have continued to gain brand share over the past year, and their joint share now exceeds 50 percent, which is likely to make it more difficult for Apple to easily take share from weakened competitors because many of the easy share gains have already been accomplished.
 
” In addition, last year’s launch of the iPhone 4S took advantage of iPhone availability for the first time through Verizon and Sprint, reaching a “huge untapped base of potential subscribers,” Baker said. “This year’s introduction faces the specter of a much smaller base of previously unavailable consumers, based on their carrier preferences,” Baker explained.
 
Despite such challenges, the fourth quarter is expected to be “Apple’s biggest quarter for iPhone sales in history,” according to IHS iSuppli.
 
“Unlike last year’s release of the iPhone 4S, this year’s iPhone 5 announcement comes as a significant departure from previous models,” said IHS mobile analyst Daniel Gleeson. “The addition of a new, larger screen is a fundamental change in product design.
 
Furthermore, the iPhone 5 is the first member of Apple’s smartphone line to feature 4G LTE connectivity, accelerating data speeds dramatically compared to previous models. These major improvements will drive strong sales for the iPhone 5.
 
” Nonetheless, analysts agreed, the iPhone 5’s advances won’t propel Apple’s unit share beyond Android’s unit share. For one thing, the prices of Android smartphones start at free, whereas “Apple only plays at the high end,” said Wayne Lam, iSuppli senior wireless analyst. New Android products also roll out at a faster pace than Apple products, he said.
 
Although analysts expect Apple’s OS share will grow in the coming quarters, Ovum warned that Apple’s share could actually start shrinking in two years if Apple doesn’t play it smart. Although Ovum said it expects the iPhone launch “will be Apple’s most successful smartphone to date,” it said that Apple must redesign its user interface and software platform in the next two years or else “find itself in a position similar to Nokia and RIM, which found themselves with outdated smartphone platforms that need replacing.
 
” For his part, Neil Mawston, wireless executive director of Strategy Analytics, called the iPhone 5 “an evolution, not a revolution.” The iPhone 5 is “bigger, thinner and lighter, with an enhanced focus on imaging, gaming and mapping services,” he said. The most important technology addition in the iPhone 5 is 4G LTE, which enables apps to download faster, videos to run smoother, and games to “get slicker,” he said. “The Apple iPhone 5 marks the start of the 4G boom.
 
” Similarly, Ezra Gottheil, senior analyst at Technology Business Research (TBR), said the iPhone 5 “offers no surprises but meaningful improvements across the board” that make for “a winning product.
 
” Apple improved the iPhone in “everything that affects the user: display, performance, portability, battery life, connectivity, photo, video and voice,” Gottheil said. “We expected most of these improvements, and many have been leaked or rumored, so the revelation of the new product was something of an anticlimax. For all of us who expect Apple to amaze, it was a tame event, but for buyers of the new iPhone, Apple delivered.
 
” Improvements include a larger display in a device that is no wider than before and a “significant reduction in thickness and weight with improved battery life,” he said. The photo and video enhancements make it easier to record and share experiences, and the images and videos are better, he said. 
 
As part of the iOS 6 operating system, Siri now interacts with a larger number of apps and can handle more types of requests, he added. The iPhone 5 also supports Siri with improved voice handling, Gottheil added.
 
“While the press reaction to iPhone 5 is likely to be muted because Apple delivered what was expected, TBR believes the product will be very successful, producing a surge in Apple revenue in 4Q12 and 1H13,” Gottheil said.
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