Apple's day of reckoning

Soon enough, after a long year of waiting and rumors since the iPhone 5 made its debut, diehard iFans and everyone else will find out whether Apple still has its game on.

On September 10, Tim Cook is expected to reveal what Apple has been working on since the iPhone 5 was introduced on September 12 a year ago.

A flood of rumors, with images mostly sourced from overseas manufacturing sites, and prognostications from analysts point to a successor to the iPhone 5 and a lower-cost model, the 5C, to appeal to more cost-conscious buyers and geographies. The last iPad update was announced last October, and Apple may be saving that for its own special reveal as it did last year.

iOS 7 buttons get a cleaner look. (Credit: CNET)

The upcoming iPhones, which based on rumors don't appear to be much different in size and shape from the current lead model, are the shiny objects attracting attention, but the real star will be the new iOS 7. The major update for iOS 7 is mostly design, such as changing the primary font to Helvetica Neue Ultra Light and buttons to rectangular regions without a clear border. Of course, there are numerous usability, camera and other kinds of improvements, but nothing that blows away the competition.

But the operating system is the reason that many people impressed by Android and the wide variety of devices, especially those with bigger screens than an iPhone, are reluctant to switch. They are hooked into the Apple ecosystem and won't cross over into foreign territory despite the attraction. But that ecosystem has become less impregnable as Android has matched iOS in the number and quality of apps available.

In effect, iPhone users are loyal to the brand (especially those with multiple Apple products), and somewhat captive, so the challenge for Apple is attracting new customers to maintain its growth curve and profit margins.

The big uncertainty that will be resolved following the alleged September 10 product reveal is whether the combination of hardware and software -- crafted into what Apple touts as objects of engineering and aesthetic precision, beauty and exceptional utility -- can excite customers who have many alternatives, and also quiet critics who believe that Apple's high-growth days are behind it.

Apple's share of the smartphone market is declining, but the company still managed to sell more than 30 million iPhones in the last quarter, including a healthy portion of the aged iPhone 4 and 4S. Samsung, with its broader array of Android devices, leads the pack, more than doubling Apple's sales in the second quarter of 2013, according to Gartner. The smartphone market continues to grow as feature phone sales decline, and a lower-cost iPhone might help Apple stem some of the share losses.

Gartner

With its September introduction, Apple will get answers to these key questions: Will iPhone fence-sitters, amid efforts by Samsung and Google to unseat the brand that started the smartphone revolution, be attracted by a faster processor, longer battery life, same-size screen, cleaner user interface, AirDrop, and a rumored fingerprint reader and champagne gold iPhone 5S? Can the iPhone 5C tap into pent-up demand for the Apple brand in fast-growing Asian markets? Can Apple overcome the smartphone fatigue that comes from a maturing market in which it's harder to create dramatic differentiation?

If the answer is not a resounding yes, people will start to question whether CEO Tim Cook's working philosophy for Apple -- build it, and they will buy -- is actually working. "We have to focus on products, making the best products. If we do that right and make great products that enrich peoples' live, then the other things will happen," Cook says .

Apple doesn't need to sell the most iPhones or iPads, but it does need to maintain its well earned reputation as a high-margin innovator and leader with at least near-best in class products. And, the company needs to keep the hits coming, with game-changing products, like the original iPod, iPhone and iPad, that redefine categories.

Apple CEO Tim Cook introducing the iPhone 5 on September 12, 2012.

Speaking at the All Things D conference in May, Cook said. "We have incredible ideas, the same culture, and largely the same people that brought you the iPhone, the iPad, many that brought the iPod, and some that even brought the Mac are still there. The culture is all still there, and many of the people are there. I think we have several more game-changers in us."

After a year of waiting, the diehard Apple fans, especially those hoping to upgrade their iPhones, and people considering a switch to the iPhone, will find out whether Apple still has its game on.

 

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