Bloomberg News

Apple Speeds Up IPhone 4 as It Tussles With Android Devices

October 04, 2011

(Updates shares starting in third paragraph.)

Oct. 4 (Bloomberg) -- Apple Inc., in its first product unveiling since Steve Jobs resigned as chief executive officer, introduced a faster iPhone with voice features and a higher- resolution camera to help it vie with Google Inc.’s Android.

The new iPhone 4S’s A5 chip will make graphics seven times faster than the old processor, Apple said today at an event at its headquarters in Cupertino, California. The model will cost $199, $299 and $399, depending on features, and will be sold by Sprint Nextel Corp. for the first time. Apple already has agreements with AT&T Inc. and Verizon Wireless.

The update of Apple’s best-selling product marks an early test for Tim Cook, CEO since Aug. 24, who hasn’t shown he can match his predecessor’s skills at product design and marketing. While the iPhone is the world’s most popular smartphone, Google’s Android software is more widely used, showing up in devices from Samsung Electronics Co. and HTC Corp. Apple let down some investors today by not unveiling a more groundbreaking iPhone 5 model, though shares rebounded late in the day.

“There is some disappointment that only one new iPhone has been announced,” said Shaw Wu, an analyst at Birmingham, Alabama-based Sterne Agee.

Jobs, who remains Apple’s chairman, didn’t appear at the event today. The 56-year-old has taken three medical leaves over the past seven years amid a battle with a rare form of cancer.

Camera Phone

The iPhone 4S, available Oct. 14, will have a camera with 60 percent more pixels and can handle high-definition video. The device also relies on an “intelligent antenna system” that’s designed to improve call quality and works with both CDMA and GSM wireless standards. Users will have up to 8 hours of talk time on one charge.

“For many customers, the iPhone 4S will be the best still camera they’ve ever owned, the best video camera they’ve ever owned, and it’s with them all the time,” said Phil Schiller, a senior vice president in charge of product marketing.

A new voice-recognition system, meanwhile, will turn the device into a hands-free personal assistant. The technology lets users check weather, get directions or surf the Web using speech commands. Apple already had basic voice-control abilities on the iPhone for placing a call or accessing a song.

Apple acquired a speech-recognition software company last year called Siri, which helped it develop the new features. The system relies on artificial intelligence to handle users’ questions.

‘Who Are You?’

Scott Forstall, a senior vice president in charge of iPhone software, demonstrated the technology on stage by asking the phone, “Who are you?”

It responded, “I am a humble personal assistant.”

The features, combined with the more aggressive prices, will give Apple an edge, said Andy Hargreaves, an analyst at Pacific Crest Securities in Portland, Oregon.

“Siri is very unique from what I’ve seen and should continue to differentiate them at the high end,” he said.

The older iPhone 4 model will now cost $99, and the iPhone 3GS will be free with a wireless contract, Apple said.

The company also demonstrated iCloud, a new service for storing files such as pictures and music on Apple’s remote servers. That means the files can be accessed through iPads, iPhones and Macs, and mobile devices no longer have to sync up to a computer. Apple will give away advertising-free e-mail as part of the service, which comes out Oct. 12.

Twitter Features

Apple showed off other new software features, including an integration with Twitter Inc. that lets users quickly post updates to the social-blogging service. Apple’s new iOS 5 operating system, which runs its mobile devices, also will be available for free on Oct. 12.

The iPhone accounted for almost half Apple’s sales in the most recent quarter. Combined, the iPhone, iPad tablet and iPod Touch touch-screen media player have sold 250 million units in total, Apple said today. There are now more than 500,000 applications in the company’s App Store, which has generated $3 billion for developers since its debut in 2008.

“In three years, customers have downloaded 18 billion apps -- and it’s accelerating,” Forstall said at today’s event. The rate is now over 1 billion per month, he said.

The company also is making inroads with corporate users. Ninety-three percent of Fortune 500 companies are testing the iPhone for use by their employees, and 92 percent are trying out the iPad, Apple said today.

Smartphone Showdown

At stake is leadership in the market for smartphones, which is projected to double by 2015, when 1 billion of the handsets will be sold, according to research firm IDC. While Apple is the single biggest smartphone maker, the Android coalition leads the market, accounting for 41.7 percent.

It’s been 16 months since the last iPhone release -- a longer lag than usual. The pent-up demand may help Apple sell a record 25 million iPhones during the December quarter, according to estimates by Gene Munster, an analyst at Piper Jaffray Cos. The lack of an all-new iPhone, with a different outer design, won’t deter buyers, he said.

“Everyone would have liked a new form factor, but they’re still going to sell a boatload, and there will be long lines,” Munster said. “It’s less about hardware and more about software and services.”

The success of the iPhone has helped Apple’s stock weather market turmoil and the resignation of the CEO who made Apple the world’s most valuable company. The shares have climbed 15 percent this year. Apple fell $2.10, or less than 1 percent, to $372.50 at 4 p.m. New York time on the Nasdaq Stock Market.

Chinese Growth

The company is looking to China to fuel a new wave of growth. Apple plans “a lot more” stores for the country, Cook said today. The company’s retail outlet in Shanghai had 100,000 visitors on its opening weekend, he said.

Voice recognition is emerging as the latest arena for Apple’s rivalry with Google, which has spent years promoting speech technology. Current Google features transcribe voice messages to text and perform Web searches based on verbal commands. The challenge so far has been getting mainstream users to adopt the technology, said venture capitalist Larry Marcus, who has invested in speech-recognition company SoundHound Inc.

The new speech technology builds on a service Apple introduced in 2009 called Voice Control, which lets users make a call or play music by speaking into the phone. Those features haven’t taken off among the general public, Marcus said.

Apple also gave updated figures on its Mac computer division. The new OS X Lion operating system has been downloaded 6 million times, and the Mac business has an installed user base of 58 million, Cook said.

Apple’s iPod, meanwhile, remains an important business, Cook said -- even as the iPhone cannibalizes some of its sales. The company introduced a new $129 version of the iPod Nano and a range of iPod Touch models starting at $199.

The iPod, which made its debut 10 years ago, has reached sales of 300 million units globally.

“It took Sony 30 years to sell 220 million Walkman cassette players,” Cook said.

--With assistance from Peter Burrows in San Francisco. Editors: Nick Turner, Jillian Ward

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net

To contact the editors responsible for this story: Tom Giles at tgiles5@bloomberg.net


Hollywood Goes YouTube
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus