Apple's new iPhones need something extra

To get jaded -- or price-conscious -- consumers excited again, CEO Tim Cook will have to take a huge gamble.

By Jonathan Berr Sep 9, 2013 12:11PM
A man uses an Apple Inc. iPhone 5 inside the company's store in Hong Kong, China, on July 17, 2013 (© David Paul Morris/Bloomberg via Getty Images)Is the public ready for not one but two new Apple (AAPL) iPhones? CEO Tim Cook sure hopes so.

According to The New York Times and other sources, the Cupertino, Calif., tech company tomorrow will unveil a new, improved iPhone with a faster processor along with a lower-cost version. Expectations for these new products are high on Wall Street. Shares of Apple, which have surged 20% in the past two months, traded up on Monday morning, breaking above $500 once again.

Sentiment, though, can quickly turn sour if the new iPhones don't wow investors because the company has a tough road ahead. As The Times noted, "many people already own a smartphone and are not upgrading to new devices as often as before." The problem is that many iPhone users find their existing devices to be "good enough" to meet their needs.

Apple is trying to get consumers who say that to open their wallets in two ways. First is the "wow factor," offering features that are so cool that even users who aren't early adopters have to have them. The improved iPhone is said to have a better camera flash along with a fingerprint scanner for enhanced security. Perhaps Apple is betting that users will find the feature handy for e-commerce. According to Apple Insider, the new iPhone may look different than older models by sporting a home button with a silver ring around it.

Apple is also appealing to frugal consumers who consider it to be an aspirational brand by launching a cheaper model, possibly called the 5C. But Gartner analyst Anshul Gupta recently warned of the 5C's potential for "cannablization" of sales of the pricier model, likely called the 5S. And as phones running Google's (GOOG) Android phones get cheaper, "it's getting harder for buyers to justify the premium price tag on iPhones," ZDNet says.

The Times noted that the low-cost iPhone is expected to be priced between $300 and $400, placing it among midtier smartphones. That's similar to the approach Apple took with the iPad Mini.

However, a cheaper iPhone may make it easier for Apple to increase its sales in China, the world's largest wireless market, and in other developing countries where Android has been making inroads. It also might attract what The Times calls "a subset of people in developing countries who flaunt gadgets as status symbols, like jewelry." Such individuals also surely exist in the U.S. and other developed countries.

Though "go big or go home" is a well-worn business cliché, it's true in Apple's case. "After six years of selling the same device, Apple needs to be ready to break the iPhone to remake it," according to ZDnet.

That's easier said than done. Investors better fasten their seatbelts because the ride ahead could be bumpy.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.

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Sep 9, 2013 12:40PM
Sep 9, 2013 12:42PM
The good thing for apple is how easily iPhones break when dropped, and they will get dropped.
Sep 9, 2013 2:33PM
OMG... you mean they are BLUE now? How have we lived without that so far? The updated OS will correct the word- Apple to- Made in China.
Sep 9, 2013 3:46PM
It makes me kinda sick to think, in a few short years, today's kids will be telling their children as deterrent to complaints about whatever form communication devices come in, "Don't be upset, I had to use the FIRST iPhone when I was your age, we had a lot less then, and it was good enough for us."
Sep 9, 2013 3:02PM
Unless it has a bigger screen, don't bother.
Sep 9, 2013 3:29PM
Wow, two different new phones!!! Didn't i tell you Apple was brilliant!

(Meanwhile Samsung, HTC, Moto, Nokia etc - they NEVER would have thought of that - call the lawyers!)

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