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Apple's Big Reveal Was A Bust, Say Analysts. Will Updated iPhones and Watches Spark Sales?

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Apple's Big Reveal Was A Bust, Say Analysts. Will Updated iPhones and Watches Spark Sales?

Chief Executive Tim Cook appears to have failed to knock the socks off analysts Wednesday when he introduced the newest rounds of bells and whistles on the iPhone, the latest dubbed the iPhone 7 and the iPhone 7 Plus, and the Apple Inc (NASDAQ: AAPL) Watch.

The newest rendition of the smartphone will be trimmer and has replaced the headphone jack with a Bluetooth wireless component that uses pocket-sized Lightning-enabled Airpods to connect the phone to ears. Analysts and consumers have complained about the jackless headphones since the rumors first surfaced in June, but Apple' Philip Schiller, senior vice president of worldwide marketing, says wireless is the future, and getting rid of the headphones is the first step toward it.

Analysts noted after the presentation that while wireless may be the future, it doesn’t allow the user to charge the battery and talk on the phone at the same time. How problematic might that be?

The new phones, which will cost $649, will be available for pre-order on Friday. They also have faster processors, will be more energy efficient and have re-engineered home buttons that are force sensitive rather than a mechanical click. Apple called the design “new”—and certainly there are new colors—but analysts said they didn’t see a whole lot of originality in the iPhone 7s.

The iPhone 7 Plus also will have capability for dual cameras, designed to produce clearer pictures as well as better options for zoom and depth, allowing the phone to find the photo subject and blur the background. But the phones won’t come equipped with the depth-map feature, which will be free software update in the future.

The new “series” Apple Watch, which is how they will be referred to now, will include a GPS chip, faster processor, wider screen, and a better way to contact emergency services. A partnership with Nike Inc (NYSE: NKE) is creating a Nike + version for fitness buffs that analysts say is aimed at giving companies like Fitbit a run for its money. Among the other extras is water resistance. The first Apple Watch was “splash proof,” according to company, while this new series is “swim proof.” Apple says it redesigned the speaker with a mechanism that will actually push water.

Despite some of the updated and modern features, analysts weren’t terribly impressed, they said. “There was nothing new,” Danilo Kawasaki, an analyst at Gerber Kawasaki, said on CNBC right after the event. “They talked exactly about what was said in the media.”

Indeed, many of the features on the new phones, like water resistance and some camera characteristics are already available in phones of competitors like Samsung.

Why does all this matter? Because Apple's introduction of the iPhone nearly nine years ago was the harbinger of mass acceptance of the smartphone, long recognized by analysts and market experts as one of the most successful technological innovations in history. Will these new qualities spur more innovation?

“Apple continues to be our most widely held individual stock and is consistently among our top-traded securities especially when considering option activity,” says JJ Kinahan, chief market strategist at TD Ameritrade. “In general we have seen opportunistic behavior among our clients as they have dialed back positions following short term rises and bought shares following pullback.(See Investor Movement Index).

Ahead of Apple's event, call options were very active in the weekly and monthly 110-strike lines.

In less than a decade, smartphones and the advancements and originality they have introduced have overwhelmingly become the mobile-communication tool of preference worldwide. Though smartphones, which link telephony with computing in handheld devices, were first introduced in the early 1990s , they weren’t patented until 1994 and didn’t hit mass markets until the mid 1990s. Apple brought out the iPhone in 2007, which was the first smartphone to use a touchscreen, a new bell that wasn’t available on the early versions from the likes of Nokia (NOK) and Motorola (which has since split into two companies , Motorola Mobility and Motorola Solutions).

The iPhones were an instant hit and dominated new sales for many years, but Alphabet’s (GOOG) open-source Android platform began to overshadow smartphone sales worldwide by 2012 and now commands some 86.2% of the smartphone market, according to Gartner, the technology research company. Samsung and its Android platform is the clear smartphone market leader, at 22.3%, with Apple and its iOS platform behind by almost 10 points at 12.9%. Huawei, which also uses Android, takes the No. 3 spot at 8.9% market share, according to Gartner’s Q2 analysis released last month.

Apple sales have declined for the first time in both Q1 and Q2 this year. Will today’s move stem that tide and help reclaim some of those lost revenues?

Though Samsung is the market leader, its new Galaxy 7 smartphones were recalled late last week after batteries exploded, underscoring the challenges smartphone makers face when they struggle to tweak the bells and whistles.

Apple's latest twists may generate more buzz for the products, but analysts also wonder if they’re enough to propel innovation and, consequently, sales of smartphones overall. What’s ahead, they say, are more apt to be bigger game changers, like bendable screens and virtual reality.

 

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