Apple’s prospects a lot brighter as stock surge greets iPhone launch

Apple's prospects seem a lot brighter than they were the last time Tim Cook introduced an iPhone.

When chief executive officer Cook unveiled two new smartphone models 12 months ago, Apple's stock was slumping and the company was losing market share to Samsung Electronics and low-cost manufacturers such as Xiaomi Corp. Questions abounded about whether Apple could keep innovating without co- founder Steve Jobs.

Fast forward to a year later and the company’s stock is flirting with a record high. Anticipation is building for the bigger-screen iPhones, a wearable device and a mobile-payments system it is understood that Apple is set to announce today.

Even the recent stolen pictures of naked celebrities such as Kate Upton from Apple’s iCloud service have done little to derail investor enthusiasm. Driving the change are shifts in the smartphone industry and how investors have come to accept that Cook is firmly in charge of Apple.

Rival Samsung is losing momentum as its multiple-device strategy to please all people at all prices is stalling, making Apple’s decision to stick just with high-end phones look smart. Cook is also set to give investors what they’ve been seeking: a new category of products, and larger- screen devices that consumers have been craving.

Tippy top

"They're on top of the world," said Tim Bajarin, an analyst at Creative Strategies Inc. "The No. 1 difference between last year and this year is the fact that Wall Street and even the customers have embraced the fact that this is Tim's company -- he's proven that he not only can pick up the mantle of Steve Jobs but advance it." Even Cook's venue choice for tomorrow's event is symbolic, Bajarin said.

Apple will reveal its latest gadgets near its Cupertino, California-based headquarters at the Flint Center for the Performing Arts. That’s where Jobs introduced the Macintosh computer in 1984 and the iMac in 1998, both of which triggered growth spurts at the company. Cook still has a lot to do to maintain Apple’s growth streak.

The wearable device, which may include features for tracking health and fitness activity, along with a push into mobile payments, will test Apple’s ability to integrate hardware and software to make the products easy to use. Competition against deep-pocketed Samsung remains stiff in smartphones and other mobile devices.

Trudy Muller, a spokeswoman at Apple, declined to comment.

Bigger IPhones

Apart from investors, software developers are also optimistic about Apple’s prospects. Mark Kawano, CEO and co- founder of Storehouse Media Inc., said he’s looking forward to iPhones with larger screens, a better camera and an operating system that will likely let his company’s storytelling application be better utilized.

“More and more, the iPhone is just getting better and better at things that a traditional computer used to be good at,” he said. “Those things are what we are really well positioned for.”

Apple's perceived renaissance dates back to earlier this year. At the end of 2013, Samsung, with its panoply of multipriced Galaxy devices running on Google Inc.'s Android operating systems, loomed large. The Suwon, South Korea-based company's share of the global smartphone market had surged to 31 per cent, while Apple held about 15 per cent, according to researcher IDC.

Facing critics

Apple, meanwhile, faced criticism from analysts and investors for holding to a single phone style and high prices. Its then-new iPhone 5s started at $199 with a wireless contract and the less-expensive iPhone 5c was offered at $99 with a contract. The unsubsidised iPhone 5c was priced at $549 in the U.S. and 4,488 yuan ($733) in China while Xiaomi's handset cost 1,999 yuan and Lenovo Group Ltd.'s flagship K900 IdeaPhone sold for 3,299 yuan.

“There was speculation in the tech media that the 5cs were going to be the low-price phones, so when they came out and the pricing didn’t really address the broader emerging markets that wanted cheaper phones, that obviously led to some level of disappointment and sell off,” Walter Piecyk, an analyst at BTIG LLC in New York, said. Samsung Slowdown Yet Samsung -- instead of ratcheting up its revenue at Apple’s expense -- began facing slowing sales growth as it got squeezed by competitors such as Xiaomi on the low end and Apple on the high end.

Samsung’s global smartphone market share slid to 25 per cent in the second quarter from 32 per cent a year earlier, according to IDC. In July, Samsung reported sales and profit that missed analysts’ estimates.

“The loss of momentum at Samsung creates an unforeseen buffer globally -- and is timed perfectly into a launch of larger screened phones with the potential to even get customers to switch back to Apple,” Ben Reitzes, an analyst at Barclays, wrote in a July note to investors. B

y contrast, Apple steadily reported increasing year-over- year iPhone sales that topped analysts' estimates. The new handsets "primarily" fueled Apple's 12 per cent sales gain by unit during the first three quarters of the company's 2014 fiscal year, according to a filing with the U.S. Securities and Exchange Commission.

Best ever

At the same time, Apple executives began a drumbeat to raise anticipation for new products. In May, Eddy Cue, head of iTunes, said products to be introduced later this year are the the best pipeline Apple has had in 25 years. In July, chief financial officer Luca Maestri echoed that by saying he was “expecting a very busy fall.” Cook chimed in and said the company has an “incredible pipeline” that “we can’t wait to show you.”

Bloomberg