Sprint's Big Fat iPhone Bet
As promised, Apple showed off its latest iPhone Tuesday, and although the handset was packed with new features and hardware like a new chip and an improved camera, the general reaction was less than spectacular. Meanwhile, the iPhone's newest U.S. carrier, Sprint, has reportedly placed a huge bet on its future ability to sell the phone.
Apple watchers flocked to Cupertino Tuesday to finally see another of the company's highly anticipated product rollouts. There they witnessed a new iPhone complete with voice-recognition technology, new and improved iPods at cheaper prices, and a glimpse into Apple's future with iCloud.
As usual, countless rumors touching on every possible iPhone tweak surrounded Apple's latest launch, and it's tough to say whether there were any outright surprises. But the company has set a high bar for itself, and Apple's fans an investors typically expect nothing short of amazement.
While early responses seem generally favorable toward the iPhone 4S's revamped camera, voice recognition technology and "world phone" wireless capability, some responses were critical, saying that this wasn't the device they'd been awaiting for 16 months. The day the iPhone 4S was introduced, Apple stock lost over half a percentage point, while the Dow climbed 153 points.
However, hardware wasn't the only thing on Apple's plate Tuesday. Its new iOS 5 mobile operating system and highly anticipated iCloud service were both heavily pushed and demoed at the presentation.
Viewers got a clear look at some of the best features of the iCloud service and its capability to sync content such as songs, documents and photos instantly to all a users' Apple devices upon initial download.
The new Siri-enabled voice technology on the iPhone is another way Apple expanded the device's capabilities beyond the communications network to develop its ecosystem.
"That technology has been around for years, but we're going to see what Apple can do to change that and bring a brand new way of using speech recognition. It will be interesting to see if it catches on," William Stofega, program director of mobile device technology and trends at IDC, told MacNewsWorld.
Sprint in the Running
On the carrier front, Sprint will become the third U.S. wireless provider to carry the iPhone, but it won't come easy for the company. Like the other carriers, Sprint will have to buy the phones for around US$600 each, then sell them at the suggested retail prices, starting at $199 with a two-year contract.
The Wall Street Journal reported that Sprint -- the third-largest carrier in the U.S. and in a more difficult financial position relative to rivals AT&T and Verizon -- made a commitment to purchase more than 30 million iPhones over the next four years. Neither Apple nor Sprint responded to MacNewsWorld's requests to confirm that number.
The move has the potential to be a lifesaver for Sprint, especially as future iPhones with more advanced wireless capabilities come along. However, the initial capital could put a strain on current balance sheets.
"It would make sense strategically for both companies. Sprint has the most mature and widespread true 4G network in the U.S. They are in desperate need of a winner. Apple needs a 4G network to push new experiences out to the iPhone faithful, especially in the face of competition heating up from Amazon," John Feland, CEO of Argus Insights, told MacNewsWorld.
Sprint is in the unique position of having a largely functional, up-and-running 4G network, a capability that AT&T claims it needs a merger with T-Mobile to complete. Though service in less populated areas is a large source of complaints toward Sprint, if the company can provide a faster, more reliable network, it could leap ahead in a race in which it hasn't been a dangerous contender for years.
"Our data has shown the network matters a lot. We know that many defected from AT&T to Verizon, even paying off their contracts early, to get on a network that delivered a more complete phone experience," said Feland.
It's a risky move for the company, but it's the kind that can pay off well, especially when the company is in the position of going big or going home.
The financial and volume commitment to which Sprint is allegedly agreeing is daunting, Jonathan Chaplin, director of communications services for equity research at Credit Suisse, wrote in a note. However, it's manageable. The reported 30.5 million devices would be about 24 percent of Sprint's sales over the next four years, he noted, compared to the iPhone accounting for 39 percent of AT&T's sales volume over the past year.
Though it's uncharacteristic of the company to promote a specific carrier, Apple could encourage those sales by reminding consumers of Sprint's wireless capabilities.
"Sprint has long been the silent partner behind Kindle's success in delivering content on demand. It would be a good play for Apple to leverage Sprint's experience in provisioning higher bandwidth to consumers for their next play," said Feland.
More Patent Woes
While announcements regarding new products and providers were going on in the States, an ongoing Apple patent battle hit another snag in Australia. Apple is attempting to put an injunction on Samsung's Galaxy Tab 10.1 there, claiming the touchscreen infringes on an Apple patent.
The companies failed to reach an out-of-court agreement proposed by the South Korea-based Samsung last week, so the case went to an Australian federal court Tuesday. The Korean electronics makers' legal team protested that an injunction would kill the product since it wouldn't be made available during the upcoming retail-happy holiday season -- exactly the outcome Apple is hoping for.
Though the iPad is the untouched tablet leader, Samsung's tablets have been gaining momentum as the device category becomes more mainstream. Sales of all tablets are expected to jump over the holiday season. With Amazon's new Kindle Fire tablet threatening the iPad, Apple's legal team is even more determined to keep the Galaxy Tab off shelves in Australia.
This patent spat is just one of hundreds across the globe that have yet to be resolved, even after Congress passed recent patent reform legislation intended to cut down on tangled patent litigation that threatens innovation.
"With the new technology there have been all kinds of new intellectual property concerns, not just with Apple, but the whole industry. The deeper the integration goes with technology, the more those arise, and it's going to be interesting to see how everyone deals with those," Stofega said.