Bloomberg News

Apple to Revamp IPhone Software, Ending Product Funk

June 10, 2013

Apple's Industrial Designer Jonathan Ive

After Chief Executive Officer Tim Cook appointed Jonathan Ive, senior vice president of industrial design of Apple Inc., third from left, to rethink the mobile operating system, engineers have been racing to finish the software on time for today’s event. Photographer: Chris Ratcliffe/Bloomberg

Apple Inc. (AAPL) is preparing to unveil sweeping changes to the software powering iPhones and iPads, seeking to reignite desire for its products and blunt the advance of Google Inc. (GOOG)’s Android mobile operating system.

Chief Executive Officer Tim Cook will kick off Apple’s 24th annual developers conference in San Francisco today by unveiling a new version of iOS with a simpler user interface that will scrap design features such as simulated paper and faux-wood bookshelves, according to people familiar with the plans.

The period since the iPad mini debuted in October marks one of Apple’s longest product gaps in more than a decade, coinciding with a 37 percent share slide from a record set the previous month. The redesign of the software behind the devices that generate more than 70 percent of Apple’s sales is a crucial first step toward renewing consumers’ interest, according to Ben Reitzes, an analyst at Barclays Plc in New York.

“Apple has been in a funk, and this is an important event to highlight how they are innovating,” Reitzes said in an interview. “We need to see that next big innovation.”

Live Blog: Apple WWDC 2013

With smartphones sharing many physical traits and technological features, device makers are relying more on software design and services to gain an edge and lure consumers.

As part of that, Apple will also unveil a music-streaming service, people familiar with the plans said last week. The feature won’t be available until iOS 7 is released later this year. Apple may also announce enhancements to its maps and Siri voice-recognition software. Apple’s shares rose 1.1 percent to $446.51 at 10:13 a.m. in New York.

Design Revamp

While Cupertino, California-based Apple won’t be introducing a new iPhone or iPad, anticipation for the event has been building since Cook shuffled his lieutenants, putting head industrial designer Jonathan Ive in charge of the look and feel of Apple’s software. A longtime confidant of co-founder Steve Jobs and the draftsman behind the iPhone and Mac, Ive has been leading a remake of the iOS mobile software.

“Software design hasn’t been on the same level as industrial design,” said Mark Hall, chief executive officer of Remixation Inc., maker of video-sharing app Showyou. “People see this as a chance for the software user interface to get on par with the device design.”

A lot is riding on whether those changes will prove to be a hit with buyers. Apple’s iOS accounted for 18 percent of global smartphone shipments in the first quarter, those running Android made up 74 percent, according to research-firm Gartner Inc. IPhone sales climbed about 16 percent in the period, lagging the smartphone market, which grew 43 percent.

Developer Community

Apple (AAPL) has traditionally previewed new iOS software at the conference and then released it to the public when a new iPhone is introduced later in the year. This week’s event, which costs $1,600 to attend, is geared toward application developers. As Google, Microsoft Corp. (MSFT) and Blackberry (BBRY) try to lure engineers to build for their systems, Apple is trying to maintain the loyalty of those who create games and applications.

Cook last month said the company would be giving developers more opportunities to add features that can be integrated in to Apple’s operating systems.

“It used to be that people bought devices because of the hardware and how the phone looked and maybe what kind of camera it had,” said Charles Golvin, an analyst at Forrester Research Inc. (FORR:US) in Cambridge, Massachusetts. “Now people’s loyalty is the larger ecosystem and the applications.”

In addition to developers, Apple also needs to add software and services to convince customers, along with wireless carriers that subsidize the iPhone, that the device’s ecosystem is still worth a premium compared with the cost of rival device, according to Barclays’s Reitzes.

Turning Point

Apple’s planned music-streaming service, similar to Pandora Media Inc. (P)’s online-radio service, will be free and supported by advertising. The iPhone maker signed an agreement with Sony Music Entertainment, the final record-company holdout, on June 7, said people with knowledge of the situation.

After Cook appointed Ive to rethink the mobile operating system, engineers have been racing to finish the software on time for today’s event. Ive, along with software head Craig Federighi, took over the duties of former mobile-software chief Scott Forstall, a key presenter at past Apple events who left the company as part of Cook’s management shake-up.

Even as iOS is overhauled, Apple will have to prevent a repeat of last year’s mapping software blunder. Although the company touted its new mapping software as being better than rivals, it was widely faulted for bad directions and missing features, marring the debut of the iPhone 5.

IPhone Roadmap

While Apple created the market for mobile touch-screen devices, the company hasn’t made any radical changes to the software running those gadgets since Jobs first pulled the iPhone out of his pocket in 2007. While Jobs said Apple’s innovations gave it a five-year head start, Samsung Electronics Co. (005930), HTC Corp. (2498) and others have caught up, according to Benedict Evans, an analyst at Enders Analysis in London.

“We’re now at a point where the difference between iOS and Android is a matter of personal choice and preference, and both of them have strong points and weak points,” Evans said. “The real issue is what are you going to do in the next five years. What is the road map to making the iPhone of five years time fundamentally superior to the iPhone today?”

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

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


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