The iPhone 5, and the decision to sell iPhone 4 models free with contract, makes Apple's ecosystem of products and services even more powerful, analysts say.
At a media event in San Francisco, Calif. on Wednesday, Apple introduced iPhone 5, the latest version of its popular smartphone, debuting compelling features. But more notably, Apple just increased the allure of its ecosystem of products and services, thereby tightening its hold on smartphone users, analysts say.
The new model phone has been widely anticipated by consumers and competitors, with the former delaying phone purchases and the latter making product announcements in advance of the iPhone 5's predicted debut for fear of being overshadowed and ignored by the press.
Apple SVP of worldwide marketing Phil Schiller bestowed the company's usual store of superlatives on the iPhone 5. "It's the thinnest phone we've ever made, and the lightest," he said, calling the iPhone line, "The best phones at every price-point." In a statement, Schiller described the iPhone 5 as "the most beautiful consumer device that we've ever created."
Despite Apple's efforts keep its new phone secret and CEO Tim Cook's assertion earlier this year that the company was "doubling-down on secrecy," the company's own website confirmed the existence of the iPhone 5 before the official announcement. Searches for the term conducted by 9to5mac.com revealed placeholder pages at Apple.com identifying the "iPhone 5" and affirming that the phone includes LTE networking. And that's to say nothing of the fact that the invitation to Apple's press conference showed the shadow of a "5," all but erasing any doubt about the new iPhone's name.
As is more or less required for new mobile hardware, the iPhone 5 is faster than its ancestors. Apple's flagship phone sports an Apple A6 processor, which is 22% smaller than the Apple A5 found in the iPhone 4S. Apple claims the A6 is twice as fast as the A5 at general tasks like launching apps and at computationally intensive tasks like processing graphics.
The iPhone 5's networking capabilities are faster, too: It support HSPA+, DC-HSDPA, and LTE wireless networking, as well as 802.11n at 2.4 GHz and 5GHz. Apple says the iPhone 5 can achieve wireless speeds of up to 150 mbps, though it notes this is "based on theoretical speeds, [and] actual speeds may vary."
Battery life has been improved. The iPhone 5 can browse the Web using LTE for eight hours, can view video for 10 hours, and can maintain power on standby for 225 hours, according to the company. If this holds true for most users, it's a noteworthy under-the-hood enhancement, given that LTE in earlier phones has tended to reduce battery life.
And then there's screen: It's a 4" Retina display, with 1136x640 resolution and a 16:9 aspect ratio. As a point of comparison, the iPhone 4S screen measures 3.5", with 640x960 resolution and a 1.5:1 aspect ratio.
While its screen is larger, the iPhone 5 is 18% thinner and 20% lighter than last year's model. It's available in black or white.
The iSight camera still produces eight megapixel images, but its lens is smaller and more durable, according to Apple. The camera supports the creation of panoramic images just by panning across a scene and includes improved image stabilization and video face detection.
There's also a directional microphone system that produces higher quality sound and reduces background noise. The iPhone 5 should provide clearer phone conversations, thanks to support for cellular wideband audio.
Forrester analyst Charles Golvin believes the iPhone 5 is enough to keep Apple ahead of its competitors. "Apple still outpaces the competition when it comes to the entire package--the new iPhone unites significant improvements in industrial design, imaging, audio, and connectivity, along with the wealth of new capabilities that iOS6 enables," he said in a blog post. "Apple will sell a boatload of iPhones--especially now that both Verizon Wireless and Sprint will have an iPhone (the 8 GB iPhone 4) for consumers' favorite price: free."
Golvin argues that the iPhone 5 will help Apple's make its ecosystem of products and services more powerful, thereby diminishing the ease with which customers can switch to competing ecosystems. "Amazon, Apple, Google, and Microsoft all aim to translate customers' investments--of money, information, personalization, and social connections--into a gravitational field of loyalty so powerful that few customers will ever attain escape velocity," he said.
Beyond the expected features--faster, lighter, thinner--there is one change that may prompt iPhone users to spend more money. The iPhone 5 introduces a new dock connector, used to connect the device to peripherals. "Lightning," as Apple has called it in a nod to its Thunderbolt connector for OS X devices, is a reversible 8-pin connector--it isn't limited to use in a specific up or down orientation. It replaces the 30-pin dock connector that Apple has been using since 2003 and that has been built into multitudes of gadgets over the years. In the event wireless connectivity isn't an option, those gadgets will not be able to connect with an iPhone 5 without an adapter.
Apple of course will sell you an adapter to connect the iPhone 5 to older peripherals for $29 (without a cable) or $39 (integrated cable, for extra reach). The company's profit margins on these chunks of plastic and wire are likely to be significantly higher than 25%, its average profit margin in 2011.
Given the new Lightning connector and the new shape of the iPhone 5, Velti, a mobile advertising company, puts the cost of replacing iPhone accessories--cases, sound stations and docks, USB cables, car chargers, and the like--at about $400, as much as the most expensive iPhone 5 with a contract subsidy.
Pricing for the iPhone 5 with a two-year contract is the same as the iPhone 4S when it debuted: $199 (16GB), $299 (32GB), and $399 (64GB). However, with the arrival of a new iPhone, older versions are being discounted. The iPhone 4S is now being offered for $99, the iPhone 4 is free--with a contract--and the iPhone 3S has been discontinued.
Golvin sees the availability of iPhones for no initial charge as a sign that Apple's iPhone customer base will keep growing. "Now for the first time, every carrier selling the iPhone in the U.S. will have one they can sell for zero dollars," he said in a phone interview, noting that he believes enterprises will pay attention, too.
The fact that the iPhone 5 runs older iOS apps seamlessly is a benefit to corporate iPhone users, who won't have to worry about incompatibilities. But beyond that, Golvin says enterprises have to deal with iPhones, like it or not. "We're no longer in a time when CIOs can dictate what employees use," he said. "Employees are going to buy these devices. The onus falls on the enterprise to allow, encourage, and take advantage of these products, to make employees more productive."
The iPhone 5 ships with iOS 6, which will be available for download on Wednesday, September 19. The iPhone 5 goes on sale two days later, on Friday, September 21, in the U.S., Australia, Canada, France, Germany, Hong Kong, Japan, Singapore and the U.K.
Apple will begin accepting orders for the iPhone 5 on Friday, September 14 and will begin a worldwide rollout of the device in 22 more countries on September 28. The company expects to make the iPhone 5 available in 100 countries though some 240 carriers by the end of the year.
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