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Now that Apple (NASDAQ: AAPL ) has released the new iteration of its iPhone to raucous demand, far surpassing analysts' estimates, let's see how the smartphone wars are stacking up.
Innovation at Apple
In spite of current adverse publicity over the yet-to-be-confirmed hacking of the iPhone's fingerprint scanner, the smartphone's biometrics-based security is a significant advancement. It does not have to be bulletproof to be highly effective in comparison to users having to create a password and keep it secret.
At least for this round, Apple scores points with both the public and analysts for innovation.
Some Samsung fans may argue that consumers may not currently view the fingerprint scanner as a major competitive feature, especially in comparison to screen size. Considering over 60% of the time spent using a smartphone does not involve phone calls, but tablet-related activities, its hard to dismiss this argument.
Apple dropped about 5% after it announced its new phones because of how it compares to Android devices such as Samsung's S4 and Note III. Nevertheless, millions of upgrading iPhone users and people who were waiting to buy an iPhone purchased with a vengeance leading to the recent jump in Apple's stock.
It's also my belief that the 5s release has strengthened Apple's brand halo. I have a wealthy friend who waited in line for hours on its release date specifically for the fingerprint scanner, believing it would prevent his wife from looking through his phone (a daily occurrence). You don't think Tiger Woods wished he had that phone a few years ago? The 5s is guaranteed to become the default phone among celebs, adding to its cachet, and Apple won't have to pay a dime for their endorsements.
iOS 7 vs. other OS's
iOS 7 is also significant for Apple's future. However, with nearly 80% of the world's smartphones running Google's (NASDAQ: GOOGL ) Android OS, the intermediate and long-term does not look as bright for Apple's smartphone business with that market approaching saturation in the next two years. It is possible that Apple may return to being more of a niche products company, and Android devices the standard, much like Microsoft (NASDAQ: MSFT ) Windows was the default OS for PC's.That being said, iOS 7 has debuted to largely positive reviews.
BlackBerry is going private and intends to specialize on the enterprise (governments and corporations), conceding the consumer market to Apple and Android. Windows 8 Phone has more strength behind them than most people realize, given Microsoft's financial and marketing resources, and countless developers already using Visual Studio for programming. However, the fact remains that there is no compelling reason for consumers to use it, since majority of people are used now used to using Android or iOS for consumption. That's the price Microsoft pays for being late the party with a compelling offering.
However, Microsoft remains resolute in its need to be a player in the mobile market place, as demonstrated by its 7 billion dollar acquisition of Nokia's handset business. As the world turns away from the traditional PC, this is a necessary move to keep Microsoft relevant. Between Google giving away Android for free, and Apple making its iWorks productivity suite gratis, Microsoft's profit centers (Windows and Office) are under major attack. Increased market share in the smartphone and tablet world is key for the future of Microsoft.
That being said...
Congratulations to Apple for their successful release, and shareholders should anticipate a boffo quarter. Like Carl Icahn states, with its already the incredibly strong brand, strengthened by the 5s release, the cash the company has, a 2.6% dividend, and their share repurchase program and low P/E multiple, especially relative to the average S&P average of 17, Apple looks very cheap.
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