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Apple Inc. (AAPL) Needs a Revamped Mobile OS

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Next month at the Worldwide Developers Conference, Apple Inc. (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 Inc. (NASDAQ:AAPL) into a new era of ingenuity.

Perception is (almost) everything

Earlier this week at the All Things Digital conference, Apple Inc. (NASDAQ:AAPL) 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.

iOS 7

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 Inc. (NASDAQ:AAPL) and, say, Samsung. The quintessential differentiator for Apple and its competitors is the software.

Think for a minute why Research In Motion Ltd (NASDAQ:BBRY) BlackBerry and Nokia Corporation (ADR) (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 Inc. (NASDAQ:AAPL) 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, Research In Motion Ltd (NASDAQ:BBRY) 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 Corporation (ADR) (NYSE:NOK) 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.

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