AAPL Apple Inc

By Tripp Mickle 

CUPERTINO, Calif. -- Apple Inc. on Tuesday unveiled a trio of iPhones with additional cameras and stronger battery life, betting that improvements to familiar features along with a suite of low-price subscription services will enliven flagging sales of the devices.

At its marquee product showcase held in Steve Jobs Theater, the company's on-campus auditorium named after Apple's co-founder, the tech giant lavished much of its time on the flagship device he helped create a dozen years ago. The trio of new but familiar-looking iPhones -- now under the iPhone 11 brand -- blended standard updates like longer-lasting batteries and new colors with more innovative features such as a night mode for low-light photos and the ability to shoot video by holding down the camera button.

Apple also introduced an updated smartwatch with improved power that allows it to display time throughout the day and set prices for its new TV+ and Arcade videogame subscription services, which largely undercut competitors with a price of $4.99 a month. TV+ comes free for a year with the purchase of a new iPhone, iPad or Mac, a perk that could get more people to buy a new device or upgrade.

The company didn't reveal any surprise new devices, delivering instead the type of incremental hardware improvements that have defined its events in recent years and stirred up questions about Apple's innovation prowess under Chief Executive Tim Cook. Mr. Jobs's successor has transformed Apple into one of the world's most profitable companies but hasn't delivered a megahit product on par with the iPhone, which made its debut in 2007, or the iPad, first released in 2010, the year before Mr. Cook took over.

The Apple Watch made its debut five years ago and has largely been a success, as has the more recent AirPods wireless earbuds, but not enough to shore up falling iPhone sales. Mr. Cook has since pushed Apple to leverage its hardware success to sell more software and services.

The watch and new subscription services are central to Apple's efforts to diversify its business as the iPhone falters. Its customers are holding on to current iPhones longer and bristling at prices of new models that average nearly $1,000. Those struggles are particularly acute in China, where it is battling increased competition, trade tensions and a decelerating economy.

Amid the backdrop, Apple lowered the price of its most-popular model by $50, countering three consecutive years of price increases. The iPhone 11, a 6.1-inch device that updates last year's XR model, will start at $699 and include a dual-rear camera.

Its two higher-priced devices come with triple-rear cameras and are stamped with the "Pro" brand, a nod to a more premium market. The iPhone 11 Pro starts at $999, featuring a 5.8-inch OLED display, while the iPhone 11 Pro Max, at $1,099, has a plus-sized, 6.5-inch display.

Apple said the phones will debut on Sept. 20.

Apple also brought some pricing magic to the Apple Watch, reducing the price of its Series 3 model 33% to $199 and maintaining a price of $399 on its newest model, the Series 5.

The smartwatch prices showed Apple is willing to eat the cost of tariffs rather than pass them on to consumers. The Apple Watch was among its first products subjected to the 15% tariffs the Trump administration introduced on $111 billion in Chinese-made goods earlier this month.

Apple can absorb the extra costs of tariffs without it affecting margins because memory prices have fallen in recent years, providing a cushion, analysts said.

The company priced its TV+ subscription well below Netflix Inc., which charges $12.99 a month for the standard option, and Walt Disney Co., which will launch a new streaming service in November for $6.99 a month. Mr. Cook touted its $4.99 price tag as a deal, comparing it to the cost of a digital movie rental.

"You can be aggressive on services prices without it negatively affecting your brand," Carolina Milanesi, an analyst with Creative Strategies. "Clearly, they want their customers to use it and not feel forced to choose between it and Netflix or Hulu."

TV+ will debut Nov. 1 with shows such as "The Morning Show," a drama about a morning talk show starring Reese Witherspoon and Jennifer Aniston. Additional shows will be added in the months afterward, Mr. Cook said.

To sustain growth, Apple must squeeze more money out of existing customers by leveraging past hardware success to sell newer products and services. It has more than 900 million iPhone users world-wide, but only a fraction own an Apple Watch or pay for its streaming-music service. It has rolled out several new accessories and services to deepen its reach into users wallets, including AirPods wireless earbuds, a credit card and a videogame service called Arcade.

The emphasis on services and newer products has coincided with several high-profile executive departures, including outgoing design chief Jony Ive, who will leave later this year to start his own design firm. It's also revived questions about the company's ability to offer the type of hardware innovations that turned the iPhone into one of the world's best-selling products.

"Apple isn't growing like they were before," said Mike Frazier, president of Bedell Frazier Investment Counselling, a Walnut Creek, Calif.-based firm with about $500 million under management that counted Apple as its largest holding before scaling back its investment this year. "They're a victim of their own success."

Apple needs to encourage enough iPhone upgrades to avoid repeating the smartphone sales slump that dogged the company last year, forcing it to slash its revenue forecast in January for the first time in more than 15 years. Worldwide sales of the company's smartphones fell 15% to $109.02 billion for the three quarters ended in June. Shipments have declined an estimated 17% over that period, according to analysts, outpacing the smartphone industry's projected decline of 2% this year.

Wall Street has already begun to look ahead to next year's models that are expected to feature 5G, a faster fifth generation of wireless technology that will result in speedier smartphones. It will be lagging rivals like Huawei Technologies Co. and Samsung Electronics Co. in bringing that technology to market.

"They will lose market share in China in the premium space without 5G because the country is going to ensure 5G is relevant," said Patrick Moorhead, principal analyst at Moor Insights & Strategy. "That will trigger adoption of Huawei, Xiaomi and others and hurt Apple."

Dow Jones & Co., publisher of The Wall Street Journal, has a commercial agreement to supply news through Apple services.

Write to Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

September 10, 2019 16:21 ET (20:21 GMT)

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