iPhone5 is thinner, bigger, faster and has more battery life. There are more apps, Facebook is more deeply integrated and Siri has been enhanced further. The wave of innovation that started with new magical touch interface and apps that led to phenomenal usage on iPhone, is now abating. Siri which promised another round of innovation with its voice interface and deep integration with existing apps on the device, has not yet made the same impact as Touch interface did. iPhone5 is almost guaranteed to be the best selling iPhone ever and most selling smartphone. The question is “is that enough”. As a customer, it does not matter - I still get the best product albiet at a high price. As an investor, I care about long term growth and profitability, while share price moves to near term sales potential.
Apple needs to keep the innovation engine rolling, for margins to stay at current levels. The big challenge facing Apple is the open source, Android and copy cat apps on Android. To protect and preserve long term growth and margins, we may see more instances of legal suits between Apple and Android vendors. That said; it is very hard to control the onslaught of free and open source.
· Governments and large companies don’t prefer getting locked in to a proprietary and closed system like iOS. We saw a brief upsurge in Linux as Governments and Government owned institutions backed Linux.
· However, unlike Linux, Android has the support of application developers and device manufacturers.
· Android is already dominating traffic across the emerging countries. World is more web centric than it was a decade ago.
Can Apple innovate fast enough to maintain a strong lead over competition? iPhone5 disappoints on this metric. If Apple fails again, price competition will soon destroy Apple’s margins or worse, Apple may lose market share.
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