Could More iPhone Models Beat Back Samsung, Android?

Apple releases one iPhone a year, creating a downtime that Samsung most recently used to the Galaxy S III's advantage. Is it time for Apple to reconsider its strategy?

Demand for the Apple iPhone has "cooled off," IDC recently reported, explaining that the device has been around since October and the blogosphere has fueled rumors that a new iPhone is just around the corner. Apple, along with carrier partners AT&T and Verizon Wireless, all saw iPhone sales soften over the second quarter, and up for debate is whether that was due to the device having lost its freshness or a look that suddenly seems a bit squat beside thin-and-light smartphones with displays stretching toward the 5-inch mark.

"Samsung times its product launches to take maximum advantage of the lull in iPhone sales that usually precedes the launch of a new model," the Associated Press reported July 30 in article that included an analyst describing the current iPhone as "a bit long in the tooth."

While device makers such as HTC and Motorola have shared plans to create fewer but more distinctive devices, is it time for Apple to reconsider its single-device strategy to eliminate the long, slow period preceding each new device's release, as well as reduce the chance for its devices to seem outdated?

Apple's shipments have "roller-coastered" since it introduced the first iPhone in 2007, Neil Mawston, an executive director at research firm Strategy Analytics, told eWEEK.

"Apple iPhone demand has always peaked in its first two quarters after launch and troughed in the final two quarters as anticipation builds about a replacement model once a year. If the troughs of demand for the iPhone start to become too steep in the future, then Apple will eventually need to develop a new product for midyear launches to keep customers engaged all year round," Mawston explained.

One way to do this could be to appeal to prepaid users. (Sprint CEO Dan Hesse recently repeated a popular quote from hockey great Wayne Gretzky, who described his strategy as not going where the puck is, but where it's going. Prepaid, Hesse told journalists visiting Sprint headquarters, "is where the puck is going.")

"A new, midyear iPhone could take the form of an iPhone Mini for prepaid users, which could be positioned not to compete with the 'full fat' iPhone for postpaid users," said Mawston.

Moreover, he warned, "Apple needs to be careful about launching an iPhone Mini, however, as such a product would increase volume but its lower price-point could squeeze profit margins."

Samsung was clever to offer the Galaxy S III during the "dead spot in Apple's release cycle," Roger Kay, principal analyst with Endpoint Technologies, told eWEEK.

That said, it's not necessarily a spot Apple needs to fill in.

"I do think one of Apple's strengths is its disciplined and limited product line," Kay explained. "There are lots of good reasons to hold the reins tightly: more focus on individual products, less cannibalism, better differentiation, more efficient resource allocation, sharper brand image."

Jonathan Ive, Apple's senior vice president of industrial design, recently told the audience at the British Embassy's Creative Summit that Apple's goal isn't to make money. "Our goal, and what makes us excited, is to make great products," he said.

Preventing consumers from waiting, and possibly losing interest and going elsewhere, is low on Apple's priority list, then.

Waiting, said Kay, "builds buzz. Think of it like an ocean wave or a capacitor. Building up the charge longer ensures a more dramatic release."

Ezra Gottheil, a senior analyst with Technology Business Research, agrees that Apple's tack is a good one.

"I don't think Apple will or should increase the pace of iPhone product refreshes. Apple has benefited greatly from, and suffered only a little from, anticipation of new models. And that is the key. iPhone sales slow because of anticipation of this year's model, not because of loss of enthusiasm for last year's model," Gottheil told eWEEK.

More models are not in Apple's interest, says Gottheil. In fact, they're the opposite.

"While shortening the time between models might slightly increase Apple's revenue per user, as a larger percentage of buyers would upgrade as soon as they could, Apple would also make current owners less 'delighted,' as their iPhone would be further behind the current model," said Gottheil.

"In fact, more frequent updates do not mean that current models are further ahead of past ones," he added.

"On the contrary, it means that the incremental improvements are just that, incremental. As a product category matures, it becomes harder to make dramatic improvements. Shortening the time between versions just exacerbates the problem."

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