By Tim Higgins
Apple is set on Tuesday to unveil a 5G-enabled iPhone that has
fueled sky-high expectations for the world's most valuable company
even as uncertainty remains about how useful the next-generation
wireless technology is for consumers.
The new technology, which holds the promise of internet speeds
significantly faster than what is available for many smartphone
users, has stoked anticipation that iPhone users will see a
compelling reason to upgrade after millions in recent years held on
longer to older devices.
The wave of new iPhone purchases could be enough to compare with
2014, when Apple unveiled a larger screen and sold a record number
of devices, or 2017, when the company introduced higher-priced
models with facial recognition leading to record revenue, analysts
say.
Some investors are hoping it might even lead to the kind of
dramatic growth seen in the iPhone's earliest days, when every
annual iteration promised new technological leaps and must-have
features.
"I believe it translates into a once-in-a-decade-type upgrade
opportunity for Apple," said Dan Ives, an analyst for Wedbush
Securities. He expects the new phone to help fuel iPhone sales this
fiscal year that exceed the record 231 million devices sold in
fiscal 2015, a boom driven by the iPhone 6 Plus, the first
large-screen version of the phone. Sales of the iPhone rose 52% in
the following 12 months compared with the previous year.
Apple shares have risen by more than 50% this year and the
company's market value has soared above $2 trillion.
But it remains unclear how much interest customers have in
faster speeds, especially during a pandemic when millions of people
are working from home and are generally using home internet
connections. The coronavirus delayed production of this year's new
flagship phone, pushing back an event that has been held every
September since 2012.
"Since 2014, the newest iPhone launches have felt more like
ripples opposed to a wave," said Daniel Morgan, a senior portfolio
manager who focuses on technology at Synovus Trust Co., which
counts Apple among its largest holdings.
The prospects for 5G are still in the early stages of being
understood by consumers. Most smartphone makers -- including
Samsung Electronics Co., which has been selling 5G phones for more
than a year -- have yet to showcase a killer software application
to demonstrate why it is worth the money.
"5G utility is far from clear," said Cliff Maldonado, founder of
BayStreet Research, which advises hedge funds and technology
companies. "Samsung went over the top on 5G phones, and they got
nothing for all the work they pushed." Mr. Maldonado said he doubts
the number of iPhones sold will rise to the same level of the
iPhone 6 and 6 Plus.
Although iPhone shipments have never surpassed the fiscal 2015
record, according to Apple figures and analyst estimates, Chief
Executive Tim Cook sought to make up for those declines with
higher-priced versions of the phone, such as the iPhone X that made
its debut at almost $1,000 in September 2017.
The flagship phone with facial recognition and an edge-to-edge
screen helped boost revenue by 18% from the previous fiscal year
even as device sales rose by just 1 million units to 218
million.
Similar to that year, Apple on Tuesday is expected to offer a
swath of iPhones with differing sizes and capabilities aimed at
differing price points.
Wall Street analysts predict Apple revenue from the iPhone will
rise 15% to $160 billion this fiscal year, which began Oct. 1.
Analysts surveyed by FactSet on average don't predict iPhone
revenue to outpace the record set with the iPhone X in the fiscal
year that ended Sept. 29, 2018.
Mr. Cook also has tried to shift Apple's business more into
digital services to make Apple less dependent on the iPhone, which
makes up 50% of its sales. That strategy has faced headwinds as
rivals have mounted a public fight against Apple's control of such
services through the App Store.
Epic Games Inc., the maker of the popular "Fortnite" game, has
sued Apple, claiming the company's practices are anticompetitive.
Apple has denied those allegations and countersued, arguing Epic is
greedy and wants to avoid paying a 30% commission for using its App
Store that provides customers with a secure and private
service.
(Dow Jones & Co., publisher of The Wall Street Journal, has
a commercial agreement to supply news through Apple News.)
A Democratic-led House subcommittee last week issued a scathing
report about the power big tech companies wield and accused Apple
of exerting monopoly power through the control it holds over the
software on its systems. An Apple spokesman said the company
"vehemently" disagrees with the report's conclusions and that it
doesn't have a "dominant market share" in any area.
Investors have largely shrugged off attacks on the App Store.
Some are optimistic that a big marketing push by wireless carriers
around 5G networks will push customers to consider a new device.
Even if most customers don't understand the benefits of 5G,
investor Mark Stoeckle said he expects the marketing to spur
demand.
"The vast majority of those getting in line...are going to be:
'This is 5G, I need to get this,' " said Mr. Stoeckle, chief
executive of Adams Funds, which counts Apple among its largest
holdings. "Therein lies the brilliance of the marketing."
Write to Tim Higgins at Tim.Higgins@WSJ.com
(END) Dow Jones Newswires
October 12, 2020 10:57 ET (14:57 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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