Apple stumble opens door for rivals
According to analysts, the disappointing announcement of the Apple iPhone 4S creates an opening in the market for its smartphone competitors.
Wed, Oct 05, 2011 at 07:54 AM
UPGRADE? Apple introduced the iPhone 4S, not the iPhone 5 as many were expecting, leaving an opening for innovation from its competitors; Photo: ZUMA Press
TAIPEI/HELSINKI - Rival smartphone makers could exploit a rare letdown by Apple in the launch of its new iPhone 4S model, which failed to wow fans, and grab a bigger share of the most lucrative part of the phone market.
However, analysts also noted that Apple's decision to keep older iPhone models and slash their prices, would help the U.S. firm to reach the bigger, mass market, where it will be in more direct competition with phones using Google's Android software.
The iPhone, introduced in 2007 with the touchscreen template since adopted by rivals, has proved to be the gold standard in the booming smartphone market, and its surging sales have hit the ambitious plans of many competitors.
But shares in Apple's closest rivals, Samsung Electronics, HTC and Nokia, gained on Wednesday after Apple unveiled the iPhone 4S overnight at its headquarters in Cupertino, California.
The new iPhone 4S is identical in form to the previous model, disappointing fans who had hoped for a thinner, bigger-screened design of a product that had not been updated for more than a year.
"Apple no longer has a leading edge; its cloud service is even behind Android; it can only sell on brand loyalty now," said Gartner analyst C.K. Lu in Taipei.
"Users may wait to buy the next iPhone; if they can't wait, they may shift to brands with more advanced specs."
In Europe shares in Nokia and Ericsson, half-owner of the Sony Ericsson smartphone venture, were both more than 3 percent higher by 1115 GMT on Wednesday.
"Nokia should benefit from the fact that Apple chose not to play the design card this time around and that unlike some rumors, there will not be anything new aimed at the key mid-range market," analysts from Nordea said in a note.
Nordea said the lack of more significant upgrade to the iPhone would also help Microsoft to gain ground with its Windows Phone platform, which so far controls just 2-3 percent of the market.
Earlier this year Nokia decided to switch to use Microsoft software in its smartphones, and it will introduce its first models using the software later this quarter.
Going for bigger markets
While the new iPhone's high-tech wizardry such as voice commands -- for sending messages, searching for stock prices and other applications -- caught the attention of many analysts, it might not be enough to make it a must-have for consumers.
"Apple's decision not to launch new hardware offers rivals Samsung and HTC a window of opportunity to narrow the gap with their high-end devices before the iPhone 5 arrives," said Ben Wood, head of research at mobile industry consultancy CCS Insight.
"That said, the dramatic price cuts for 3GS and 4G gives Apple a new competitive edge in the mid-tier segment, particularly in the U.S. market," Wood said.
Apple revealed on Tuesday that it was cutting the price of the previous iPhone 4 model to $99 on a network service contract, and said the even older 3GS model will be available for free on contract. This allows Apple to hit the low-end smartphone market it had once eschewed.
Even before the low-cost phone, Apple was set to exponentially grow its China business as it stitches deals with operators in the world's largest mobile phone market, home to more than 900 million subscribers.
Top selling smartphone
Phones based on Google's Android, which is available for free to handset vendors such as Samsung, HTC, LG and Motorola, have a greater combined market share than Apple's iPhone, which is still the world's biggest-selling smartphone.
"There are still many consumers who don't have the iPhone experience, and Apple still has a lot of markets and carriers to enter, so when there's a new model with better specs, it helps to lift shipments," said Ming-chi Kuo, analyst at Concord Securities in Taipei.
"The iPhone 4S targets users who are expiring on their two-year 3GS contract."
Apple sold a record 20.3 million iPhones in the April-June quarter, with analysts estimating Samsung smartphone sales at 19 million handsets, well ahead of Nokia's 16.7 million.
On Wednesday Samsung also said it would file for a sales ban on the new iPhone with courts in France and Italy, alleging that the phone infringed its mobile technology patents, widening an already extensive legal battle with its arch rival.
The lukewarm reception given for the new phone also hit shares in Apple's suppliers.
Taiwan's Hon Hai, Apple's biggest supplier, was down 1.9 percent, while casing company Foxconn Technology fell 6.9 percent. Camera module maker Largan Precision shed 6.6 percent.
"The casing companies should be the most hit, correcting from the previous rise, because the market has expected a metal case for the new iPhone," said Mike Fang, a fund manager of Paradigm Asset Management.
(Additional reporting by Miyoung Kim in Seoul, Argin Chang in Taipei and Devidutta Tripathy in New Delhi; Writing by Anshuman Daga; Editing by Alex Richardson, Greg Mahlich and Will Waterman)
Copyright 2011 Reuters US Online Report Business News