Apple's Next iOS: Why Investors Should Care

We're still months away from a possible launch of Apple's (NASDAQ: AAPL  ) latest iteration of its iOS, but some people close with Apple are already saying iOS 7 won't be the revolutionary operating system that some are hoping for. Apple is much more than its mobile operating system, but at a time when Apple's stock is waning so harshly, so the company could use a new OS to bring back some of its sparkle.

Building a new foundation
Earlier this week, BlackBerry CEO Thorsten Heins told the Australian Financial Review, "The rate of innovation is so high in our industry that if you don't innovate at that speed you can be replaced pretty quickly. The user interface on the iPhone, with all due respect for what this invention was all about, is now five years old ." While it's debatable how much the CEO of BlackBerry can speak on smartphone innovation, it is true that the user interface of iOS has, for the most part, stayed the same since 2007.

Obviously, big updates with each new version have come along, but with an iOS 7 launch looming this summer, many are hoping for a huge leap forward. But some people close to Apple have stressed that iOS 7 won't be the drastic change some may be anticipating. An iOS developer, Guy English, who's close with people at Apple, said this on well-known Apple blogger John Gruber's podcast, "Maybe iOS 8 will be interesting, but iOS 7 will be less of a leap than many people are hoping for." He went on to say, "... no matter how impressive iOS7 will be, it's not going to be the first iPhone ."

Source: Apple.

Skepticism like this is not completely unwarranted. Last year, Apple CEO Tim Cook fired the company's chief of iOS Scott Forstall after the Apple Map fiasco and installed Jonathan Ive, Apple's longtime hardware designer, and Craig Federighi. Although having fresh eyes working on iOS could eventually bring radical change to the mobile platform, this will take time. Ive and Federighi have only been in charge of the next iOS since October, which isn't much time to build a completely new OS from the ground up.

Why investors should care
A new iOS isn't technically a moneymaking product. It's baked into Apple's latest mobile devices and used as a selling point for the products. But investors shouldn't overlook how important Apple's mobile OS is to the iPad and iPhone. According to an IDC report in Q4 2012, developers prefer to make apps for iPads and iPhones over any other mobile platform.

Source: Appcelerator / IDC Q4 2012 Mobile Developer Report.

This helps Apple get more apps into its Apps Store, or at least get them sooner. More apps, and better apps keep users tied into Apple's ecosystem and make them less likely to switch to another product.

As Android sales increase globally, iOS will continue to come under constant pressure to be better. Recently, The New York Times reported that Android tablets will overtake the iPad this year.

Source: New York Times. 

Shifts in the amount of Android tablets and phones in the market could certainly change developer's sentiment on iOS. Consumers don't necessarily chase what developers build for, but as Android tablets overtake iPads consumers may be more willing to use the Android platform for both their smartphone and tablets -- cutting into Apple's ecosystem.

Phil Schiller, Apple's senior vice president of worldwide marketing, said last week that the iPhone had higher customer satisfaction numbers than Android. His data came from Change Wave Research, which places the iPhone at 71% customer satisfaction and Android at 48% -- behind Windows Phone with 53 %.

But customer satisfaction can be a tricky measurement to track. When iOS 6 launched back in the fall, mobile OS research On Device found that customer satisfaction dropped from iOS 5 to iOS 6, an unusual trend when users upgrade to a new OS version (likely because of Apple Maps). At the same time, Android users who updated from Android 2 to Android 4 increased their customer satisfaction significantly.

A lackluster iOS won't spell doom
The disparity in customer satisfaction research makes it difficult to tell how customers truly feel, but if even some of the research on Apple's lower customer satisfaction is true, than significant upgrades to the current OS could boost consumer sentiment. Morgan Stanley's analyst Katy Huberty said on CNBC recently, "This [iPhone] 5S cycle this year will be about a killer feature that drives consumers increasingly to the platform, and that increases the value of those 500 million accounts ."

If that's true, than Apple investors could be very happy with the next iteration of the iPhone and iOS. But even if Apple doesn't release huge upgrades to its next version of iOS, it's unlikely that a mediocre OS upgrade this cycle will spell doom for the next iPhone update. What Apple really needs to do is build an iOS that leapfrogs Android features and causes consumers to think twice about switching away from their iPhone -- or give them reasons to come back. 

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Read/Post Comments (8) | Recommend This Article (0)

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  • Report this Comment On March 19, 2013, at 5:14 PM, AboutYourCat wrote:

    "Apple's Next iOS: Why Investors Should Care".....

    the only reason investors should care is because of the shills and collusion that seems to be running rampant amongst the financial blogger's who continue to prostitute themselves to Samsung..... other than that..... as long as Apple is judged on the products it devekops and it's economic fundamentals..... there are no worries.....

    the reality is..... there is more than enough room for Apple and Samsung to both be very successful..... it's the bloodsuckers and scavengers who produce nothing and are nothing..... and will say anything to promote volaitility in the market.

  • Report this Comment On March 19, 2013, at 5:26 PM, twolf2919 wrote:

    Blackberry's CEO of course would have us believe that iOS is "stale", it is "old", etc. What else would you expect. Instead of simply jumping on that bandwagon, how about asking some critical questions? Why, exactly, does iOS need a major overhaul? What can it not do (or what does it badly) that other operating systems do AND which customers really want?

    I can't really think of anything that would require an overhaul of the entire OS. Just some tweaks:

    - Easy navigation to the previously displayed app (right now you have to double-tap the home button and find the previous app in the list of currently running apps)

    - More user friendly integration of Siri results (right now if you tap on one of the results Siri gave and then decide to go back - you can't! How stupid is that??)

    - Lock screen customization. It would be nice to be able to have/place widgets there (e.g. weather, other types of clocks, etc.)

    All of these things are easily doable without redoing the entire OS.

  • Report this Comment On March 19, 2013, at 5:59 PM, JA1977 wrote:

    I have had a position in APPL since it dropped below $450. I thought I should test what I'm invested I bought an Ipad Mini. I had been using Android since it's inception. I was so pleased with the IOS functionality and cohesiveness...I went on to buy an Iphone and the Apple TV. I now buy all movies, music & books from the ITunes platform.

    My point is customers are coming to Apple too. Samsung, Android and/or Blackberry are not going to take over the world.

  • Report this Comment On March 19, 2013, at 6:16 PM, Jjkiam wrote:

    I think it is hilarious that Thorsten Heins is stating that the IOS user interface is stale. Has he looked at the interface for his new phone? It is almost an exact clone of the iPhone interface. His phone has yet to debut but is already behind the innovation curve.

  • Report this Comment On March 19, 2013, at 6:53 PM, inn8 wrote:

    Re: "...but at a time when Apple's stock is waning so harshly, so the company could use a new OS to bring back some of its sparkle."

    iOS is familiar, stable and has evolved steadily since the day it was introduced. Tweak it, add to it, but don't mess with the basics.

    ...and no, Apple's goal with iOS is and should always remain the user experience and making money for investors by making money for Apple. Apple's design decisions should NEVER, EVER be governed by the need to bolster stock price.

  • Report this Comment On March 19, 2013, at 8:05 PM, phatandfoolish wrote:

    i'll settle for something that works...

  • Report this Comment On March 19, 2013, at 11:00 PM, cskusc wrote:

    Most will move to HTML5 as it will be predominant next few years where it will create more consistent standards based platform.

  • Report this Comment On March 20, 2013, at 2:14 PM, SurplusValue wrote:

    twolf, you asked for this:

    "Easy navigation to the previously displayed app (right now you have to double-tap the home button and find the previous app in the list of currently running apps)"

    The previously used app is always the first one in the exposed list! No prob there.

    Agree with you on the lock screen customization.

    But let's add--

    1) The ability to snooze an alert.

    2) Customization of keyboards.

    3) Color-theming.

    4) Tabbed home screen interface.

    5) The ability to change the status bar--what's displayed or not displayed.

    6) Updated look and colors--too much of the GUI is a dull, drab grey--and this is, after all, the 21st century. Even Kodachrome has been around for decades!

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