Why the iPhone 5 is exactly what Apple and investors need it to be

Why the iPhone 5 is exactly what Apple and investors need it to be

The financial markets are usually right. Not always, but usually. Today Apple stock is trading higher, following the iPhone 5 launch. It’s only 2 percent higher, but it tells you that most people were quite happy with what Apple announced, from a financial perspective.

Apple already revolutionized the smartphone market. They’ve revolutionized a few markets in their time on this planet. First they brought us the GUI and mouse. Then they created the iPod and iTunes. Now they’ve brought multitouch mobile computing to the masses. Let’s not debate who invented each particular item. In the end, execution is what matters. Apple is creative, smart, and executes well.

How many commentaries have you read about the iPhone 5? If you’re the average tech geek, probably a bunch. Most of them focus on the same points - that it, Apple only incrementally improved its product. In a few minutes you can be swimming in a blogosphere full of disappointed tech geeks.

Here’s what people need to keep in mind: Apple doesn’t revolutionize the Mac product line anymore either. Sure, they drop some awesome stuff on us such as the initial Macbook Air, the unibody MacBook Pro or the latest, Retina Macbook Pro. But none of that is truly disruptive like the iPod or iPhone (and iPad) were. They’re incremental improvements, and they should be expected in markets where we’ve either seen product maturity or product leadership. And in Apple’s case - a mix of both.

OS X and the Macbook Pro line is fairly mature. Yet it still grows faster than any PC player out there, taking market share every quarter. And with so many iOS devices dropping into consumer’s hands, the halo effect is even stronger now.

This demonstrates what should be an obvious point: Revolutions are rare. For Apple stock to be a strong performer they don’t need a yearly revolution. They just need to avoid missing the next revolution, whenever that is.

Just look at Samsung and RIM. Samsung caught the revolution. They rely on Google for an OS, but they’ve gone on to become the world’s largest smartphone vendor (at least for now). You’ll never hear people say “revolution” and “Samsung” in the same sentence. And RIM? They were revolutionary, and they are fighting hard to come back with BlackBerry 10. But they completely missed the revolution that Apple created, and they're suffering as a result.

Apple is in great shape. People talk about Samsung having great vertical integration but that’s only from a component standpoint. Apple has better integration when you include components along with apps, cloud, content and retail distribution.

We won’t know what the next revolution is until it hits us in the face.

Until then, folks, enjoy the evolution.

Chris Umiastowski

Chris was a sell side financial analyst covering the tech sector for over 10 years. He left the industry to enjoy a change in lifestyle as an entrepreneur, consultant, and technology writer.

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Reader comments

Why the iPhone 5 is exactly what Apple and investors need it to be

22 Comments

I have to say, I always find your articles interesting. I/we read so much day to day on this & other blogs from a purely geeky technology point of view that, at times, it's interesting to think about them from another angle. I find your articles refreshing.

I like your comparison of the iPhone to the Mac product line where you point out that they don't revolutionize that every year. I believe that the iPhone has, for the most, part become a mature product line. We might not like or want that, but it doesn't change reality. I long for those days when the iPhone was new and fun & fresh... when jailbreaking had just been discovered. Those were the days. But our baby has grown up and matured and is still a beautiful, wonderful product.

Are you saying that Apple first invented the mouse? If so, I would double-check that. The mouse remained relatively obscure until the 1984 appearance of the Macintosh 128K, which included an updated version of the original Lisa Mouse. In 1982, Microsoft decided that because no one had come up with a good way to use Microsoft Word, they would create first PC-compatible mouse. Microsoft's mouse shipped in 1983.

Apparently the part in the article that said, "Let’s not debate who invented each particular item. In the end, execution is what matters. Apple is creative, smart, and executes well." -- What apple did was get things into the hands of mass consumers. Apple executed. Very well.

You can't say that Apple brought us the mouse followed by let's not debate who invented it. Apple excecuted so well in fact hat Apple owns a whole 10% of the computer market. Fantastic!

And Apple's market share is growing, while other computer makers are mostly stagnant. Yeah, that is fantastic.

Tough to grow when you own 95% of the personal computing business. Apple has 5%, so they have nowhere to go but up anyhow.

Spot on. To stay ahead of the game in this tech day and age is revolutionary itself. They don't need to change what's working. Consumers are still going to buy apple devices as long as it keeps making their life easier. Investors know apple has a niche in knowing what consumers need oppose to what they want.

The fact that you have written this article shows that you are on the defence from the word go.
I have no doubt that consumers will move on to other makes that will give you more for less. People are tired of the closed architecture of apple and will not be as loyal as the Mac community . By the way I have a iPhone 4 iPod and iPad 3

+1 - I agree. And about the architecture. Seriously... Windows has over 90% of the market share when it come to software. Apple will never be a huge player as MicroSoft when it comes to PC's.

Interesting comment to make that "people are tired of the closed architecture of Apple".....geeks yes, but Joe Consumer, No!

And Joe Consumer will speak loudly this weekend when sales records for the 5 will blow away anyone's expectations.

Lastly, you don't seem to be turned off by it, considering you own three Apple products. Or should I call bullshit?

My thoughts exactly. Apple introduced this version early as a defensive measure against the amazing Galaxy S3, but didn't quite make it good enough to be on par with even Ice Cream Sandwich... much less, Jelly Bean. Such an odd move for a usually very business-savvy organization. And now, your article is a defensive measure against the disappointment people are beginning to feel about this lackluster new phone. And that comment above.... "what consumers need opposed to what they want"..... huh??? lol The Recent Apps feature (not a gimmick... a very useful FEATURE), and a replaceable battery are two of the most important aspects of my Nexus. Not to mention a superior Notification Bar, App Drawer, and widgets of all shapes and sizes and functions.

Is it possible that we are expecting TOO much from AAPL. When the iphone game started they were the only show in town. Now everyone has a roadmap to innovate (courtesy Apple). Countless products exist, many better than the Iphone, MOST WORSE THAN IPHONE. This is another awesome product. However the alternatives are great too, just check out http://www.gizmotakeout.com. Disclaimer I am an Android user with a second Iphone.

Quite a few analysts (Scoble is probably the loudest, [ http://scobleizer.com/2012/07/11/mobile-3-0-arrives-how-qualcom-just-sho... ]) think the next revolution is in contextual awareness -- think what Google is trying to do with Google Now or Glasses.

I disagree with Scoble in that I don't think the iPhone "sucks" in this arena, but there is little doubt that developers (and OEMs) will try some new things over on Android first, simply because they can. Yes, pure app devs make more on iOS -- but there are classes of ideas that you cannot execute on an unjailbroken iPhone. Those ideas, not apps, are much more likely to be disruptive, and it will be interesting to see how Apple responds if/when one of these ideas catches fire on the other side of the fence.

I don't understand why some people are so disappointed that the iPhone 5 won't make toast or do the dishes for you. It's bigger and has added about the same number of features that Apple normally add with each new phone.

I own several Apple products and have flip flopped between the latest android phones and the iPhone constantly. Apple may not be the first out of the gate with the newest gimmick... Sorry... Feature, but they do it better when they finally add it.

I think they're disappointed because the iPhone 5 is missing about a half dozen major features that kick ass on other flagship devices (HD video output, NFC, expandable storage, removable batteries, interactive notifications, device-to-device transfers, apps that scale to any screen size, etc) -- not to mention the complete absence of any new or profound features like those that USED TO set the iPhone apart from the rest...

The "problem" for me is that the iPhone 5 is not ahead of the competition enough to warrant the price. Used to be that you knew it was the best (by far) and you were willing to cough up the dough to have it your hands. With this update, I'm already thinking the first guy/girl on the train with it is going to look like a douchebag for spending all that money on something that really isn't any better than the iPhone 4s the rest of us are walking around with. Apple, as a company, may not be losing its edge yet, but the iPhone is no longer the wunderbar device it once was.