10.05.11

Apple's Smart to Play It Safe

Why redesign a product that is already outselling everything else in its category? Dan Lyons on why Tim Cook offering a revamped iPhone 4 instead of an all-new iPhone 5 is a canny move.

Investors and some Apple fans might have been disappointed by the new iPhone that Apple introduced on Tuesday, but in a sense the company is just following the age-old maxim “If it ain’t broke, don’t fix it.”

A lot of people were expecting Apple to introduce a radically redesigned iPhone 5.

But why? The current iPhone 4 has been on the market for 15 months, and it’s still selling like crazy. In the quarter that ended in June, Apple sold 20 million of them, the most ever in a quarter. Some analysts think Apple might sell 25 million this quarter. No other single smartphone model outsells the iPhone.

“Apple can’t keep up with demand for the phone they have now,” says Tim Bajarin, president of Silicon Valley market research firm Creative Strategies and a longtime Apple observer.

Bajarin says Apple has perfected the manufacturing process for the iPhone 4 and would be crazy to introduce a new design that would involve completely retooling its manufacturing line. “If they’d completely redesigned the phone, it would have thrown them back six to nine months,” he says.

The new phone, called the iPhone 4S, may look just like the iPhone 4, but inside it’s a brand-new beast, with new A5 microprocessor that is twice as fast as the chip in the iPhone 4 and boasts a seven-fold bump in graphics performance.

There’s also a new 8-megapixel camera that shoots high-definition 1080p video and an amazing new voice-based command system, called Siri, that lets you schedule meetings, find restaurants, and perform other tasks without having to type at all.

In terms of specs, the iPhone 4S is pretty much on par with the best Android-based smartphones. Android phones like the Samsung Galaxy S II and the HTC Thunderbolt have larger screens, but some people will prefer the iPhone’s 3.5-inch screen, especially as it’s easier to fit the phone into your pocket.

Some Android phones also support the new high-speed LTE 4G networks that carriers are rolling out, while Apple’s iPhone 4S does not. But Apple seems to believe that most customers don’t care about LTE 4G; it’s still a new technology and not available everywhere. Also, phones that run on LTE 4G are notorious battery hogs.

Apple’s appeal hasn’t ever been about “speeds and feeds,” as techies say. Rather, it’s about ease of use and a seamless end-to-end solution where “everything just works.”

In that regard, Apple on Tuesday introduced iCloud, its new service for storing user content on the Internet and pushing it out to devices.

Video screenshot

Snap some photos with your iPhone, and they’ll get zipped out to Apple’s iCloud servers, and from there pushed down to your iPad and your Mac, automatically.

Same goes for documents. You can start editing a document on your Mac, save it on iCloud, then pull it up on your iPad and work on it some more, then finish up later on your iPhone.

This is where everyone in the industry is headed. But nobody has yet delivered a cloud computing system that is glitch free. If Apple can make iCloud work the way it’s supposed to, the company will have created a powerful incentive for people to buy nothing but iDevices and live in an entirely Apple-centric world.

The iPhone 4S comes in three models based on storage capacity. Prices are $199 for a 16-gigabyte version, $299 for 32 gigabytes, and $399 for 64 gigabytes. (These prices are with a contract.)

Interestingly enough, Apple will continue to sell two older iPhones as bargain models. The 8-gigabyte iPhone 4 will sell for $99, and an 8-gigabyte iPhone 3GS will be free.

This last bit was perhaps the most significant news of the day. Four years ago, when the first iPhone was introduced, an 8-gigabyte model was $599. Today an iPhone 3GS, which is significantly better than that original iPhone, can be had for nothing.

That’s going to be huge news to the millions of people who have yet to buy any kind of smartphone at all.

At Tuesday’s event, Apple CEO Tim Cook pointed out that for all Apple’s success, the iPhone still represents only 5 percent of all mobile phones sold in the world. “That’s a huge opportunity for us,” he said, adding that Apple believes ultimately all mobile phones will become smartphones.

By continuing to sell older models but relentlessly driving down prices, Apple is looking to gain market share, especially in countries like China. Indeed, Cook said Tuesday that Apple has six retail stores in China and plans to open a lot more. A new Shanghai store drew 100,000 visitors during its opening weekend, an indication of the cachet that the Apple brand carries in China.

Tuesday’s event was Cook’s public debut as CEO of Apple. A 14-year Apple veteran who previously was chief operating officer, he took over in August when Apple cofounder Steve Jobs stepped down due to poor health. (Jobs has suffered pancreatic cancer and had a liver transplant.)

Maybe this company is entering a new phase in which it is less concerned with dazzle and showmanship than it is with making smart business decisions.

By most accounts, Cook was an able replacement for Jobs on stage: steady, matter-of-fact, in control. It might be said that Cook’s down-to-earth performance and the at-first-glance-underwhelming iPhone 4S reflect a new face of Apple itself.

Maybe this company is entering a new phase in which it is less concerned with dazzle and showmanship than it is with making smart business decisions—like deciding what a phone should look like based on the cost of retooling a manufacturing line.

That doesn’t sound like a decision Jobs would make. But it’s the kind of safe bet that Cook, a supply-chain and logistics wizard, would view as the right thing to do. “Boring but sensible” have never been words associated with Apple. But it might be exactly what Apple needs right now.