This Tech Stock Needs a Revamped Mobile OS

Next month at the Worldwide Developers Conference, Apple (NASDAQ: AAPL  ) will showcase a new version of iOS, and possibly unveil some new hardware as well. Investors should be happy the company is releasing a new iOS, but only if the update brings Apple into a new era of ingenuity.

Perception is (almost) everything
Earlier this week at the All Things Digital conference, Apple CEO Tim Cook said that longtime Apple designer Johnny Ive has had been "key" to the redesign of the forthcoming iOS. That's good news for investors who love the simplicity and sleek design of Apple's products, but the big question is how different the iOS will be from previous versions.

The issue at stake isn't simply that the company needs a refresh of its mobile OS, but rather than it needs to be seen as an innovator again. The company has to unveil an iOS that takes consumers' breath away -- just like its first iPhone and iPad did. And it needs to do it despite whatever new hardware it chooses to showcase at the conference. The iOS needs to stand on its own, as its own impressive innovation.

Give me that sweet, sweet software
We can't discount how important a new iPhone unveiling would be, but it's important to note that in the high-end smartphone market there's not much on the hardware side that's truly different between Apple and, say, Samsung. The quintessential differentiator for Apple and its competitors is the software.

Think for a minute why BlackBerry (NASDAQ: BBRY  ) and Nokia (NYSE: NOK  ) have lost much of their market share over the past few years. Part of it was due to less-impressive hardware,  sure, but they both felt the pain when Apple introduced a pairing of hardware and software that was unprecedented. BlackBerry's OS and Nokia's Symbian were leapfrogged by iOS' truly interactive system and built around an app ecosystem that surpassed its competitors'.

At the time of the first iPhone launch, BlackBerry had about 10% of all worldwide mobile OS shipments, which peaked around 20% at the beginning of 2009. In Q1 2013, it had just 2.9%. BlackBerry's new BB10 OS, as good as it may be, has arrived too late and isn't capturing the attention of enough consumers. Consumers and businesses have moved away from BlackBerry, and it's partly due the company's lack of innovation ­-- or at least delayed innovation.

Nokia still holds 14.8% of the overall mobile market share, down from 19.7% last year. The company just helped the Windows Phone OS top BlackBerry as the No. 3 smartphone OS. But Nokia has lost its dominance because it, too, failed to innovate fast enough. Back in 2009, Nokia's chief strategist said, "Even with the Mac, Apple has attracted much attention at first, but they have still remained a niche manufacturer. That will be in mobile phones as well." The company failed to see what consumers wanted, and it's been playing catch-up ever since.

Investing in innovation
Apple has gone on to prove to both Nokia and BlackBerry that it is much more than a niche competitor, and it's done that by launching innovative products. Next month the company has another chance to show consumers and investors that it can still out-innovate the competition. I think that a completely revamped iOS would rekindle Apple's mojo and prove that the company isn't becoming a slow-moving tech behemoth.

Without an amazing new iOS, the company may see investors respond negatively to its stock -- which Apple has seen quite enough of over the past year. A revolutionary new iOS could show investors that the company still knows how make what consumers want, and hopefully push the stock back in the right direction. The ball is in Apple's court. 

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 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.


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  • Report this Comment On May 31, 2013, at 7:56 AM, greenember wrote:

    Apple is screwed. Changing the UI drastically is an admission that they are not "the best" and leaving it the same shows they are not innovative anymore. If the change it a lot, they risk losing their core audience or worse... they become Microsoft where people refuse to upgrade to the new OS and continue to buy legacy products (think Windows XP)

  • Report this Comment On May 31, 2013, at 8:22 AM, TIMNPAWC wrote:

    Apple is facing timing issue.

    If they release IOS 7 and it is a completely different UI to IOS 6, users may just move on.

    If it is not completely refreshed and ready for today's criteria for the user experience, people will move on.

    "BlackBerry's new BB10 OS, as good as it may be, has arrived too late and isn't capturing the attention of enough consumers. Consumers and businesses have moved away from BlackBerry, and it's partly due the company's lack of innovation ­-- or at least delayed innovation"

    What data are you basing this on? Three production increases since initial release?

    Only four months since initial release.

    June 28th earnings report will be first glimpse of how Bb10 is doing and still not fully released across the world. Q2 will be first full quarter.

  • Report this Comment On May 31, 2013, at 11:01 AM, k1moops wrote:

    Simple fact: Apple is god.

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