Apple Prepares to Unveil Smaller iPhone
With Narrower Ambitions
Since Apple Inc. introduced the first iPhone in 2007, mobile handsets have only gotten bigger. Chief Executive Officer Tim Cook will buck that trend on Monday when he presents a smaller iPhone, seeking to entice holdouts to upgrade to a new smartphone even if they don’t want a larger device. The ambitions for the new phone may be commensurate to its diminutive size. Unlike previous new iterations of the device, the 4-inch iPhone won’t be packed full of technological innovations intended to send hordes of Apple fans queuing around the block on launch day to snap it up. Instead, it’s meant to woo those still clinging to the more than two-year-old 5S or 5C, the last models with the more compact screen. “It will really just replace the 5S at the low end of the lineup,” said Chris Caso, a New York-based Susquehanna International Group analyst with a positive rating on Apple shares. “The 5S is getting a bit old now and won’t run the operating system that well for much longer.” The company is rolling out the new phone two months after saying quarterly sales were likely to decline for the first time in more than a decade, highlighting concern that iPhone growth has reached its limits. While analysts from UBS Group AG to RBC Capital Markets predict that shipments of the iPhone SE -- the expected name of the new model -- will be about 15 million annually, its smaller size and lower price could encourage existing customers to step up at a time of year when sales often decelerate. Apple sold more than 231 million iPhones in 2015, with sales dipping between April and September, as has been the case in previous years. Though the event is focused on the new products, Apple followers may pay more attention to anything Cook says about the company’s legal fight with the U.S. government over an order that it help the FBI unlock a terrorist’s iPhone. After more than a month of sparring -- in court filings, Congressional hearings and on national television -- the two sides will present their cases Tuesday before a magistrate judge in Riverside, California. Cook may use the stage on Monday at the company’s headquarters in Cupertino, California, to reiterate Apple’s argument that creating software to degrade the phone’s security features would inevitably endanger the privacy of hundreds of millions of users. Upgrade Slowdown The company is introducing the new, smaller iPhone at a time when customers are holding onto their handsets longer. Wireless carriers such as AT&T and Verizon Wireless are no longer subsidizing new iPhone purchases like they once did, making customers question whether the improvements warrant the expenditure on new models. A slowing upgrade cycle is something Apple has experienced with the iPad, which has seen sales steadily decline for several quarters.
