Apple Fall 2011: Best Case Scenario

In my recent report on Steve Jobs' resignation, I noted that many pundits seem to think that without Steve at the helm, Apple will lose some of its competitive edge. While anything can happen in the long run, in the short term this is dangerously stupid thinking. Let's recap:Steve did not invent Apple products alone. Nearly his entire executive staff — including everyone involved in iOS product design, development, and manufacturing — is still at Apple, and it's not like they will suddenly forgot the lessons learned from working with Steve over the past decade (the man makes a strong impression).[Image credit: Brett Weinstein]

Apple's enormous price and manufacturing competitive advantages were all masterminded by Tim Cook – you know, the guy who's been the interim CEO during much of Apple's growth spurt over the past few years, a position that has now been made permanent. Apple's "overnight success" in phones and tablets was actually built up slowly over the years, with each new product leveraging existing platforms and user interface designs, and each platform expanding its functionality over time. Now that Steve has moved to Chairman of the Board, Apple is not abandoning any of these advantages, rather it is pressing them and building new ones in iCloud and AirPlay.

Apple is probably more dangerous to competitors now than it has ever been. For example, the iPhone 4 has been on the market for over 14 months, its price has not dropped a penny, and it outsells every other phone on the market. In the coming months, a new iPhone will be launched, and that means that today's best selling phone will almost certainly remain on the market at a lower price point. Unfortunately for Apple's rivals, that isn't even the worse case scenario.

Best Case Scenario (for Apple's Competitors)

1. The existing iPhone 4 remains on the market or is replaced with an 8 GB version.The iPhone 4 will get an upgrade to iOS 5, which brings iCloud and various software improvements. It is possible that AT&T and Verizon Wireless will decide to subsidize it only down to $99, as they will both have it, so AT&T won't be able to uniquely offer a low priced iPhone. However, AT&T sold millions of iPhone 3G S's at $49, so there is every reason to believe that they will do it again. If AT&T sets the iPhone 4 price at $49, Verizon Wireless will probably match it.2. Apple introduces the iPhone 5 with a larger display, dual core processor, and camera spec bump.The larger display would still have the highest resolution display on the market, but spread out over a larger surface area, subjectively improving web browsing, media playback, and apps. Apple will almost certainly implement the display along with new manufacturing methods that requires minimal bezel and does not radically enlarge the phone overall.

[aquote]Apple would be set to break all kinds of sales records with the new iPhones, but this would be widely positioned in the press as a disappointment[/aquote]

Apple is reportedly already using HSPA-capable chipsets in the CDMA iPhone, and with the new version, Apple should be expected to enable that functionality. Apple sweats the details; it could also push carriers to offer simpler and more affordable roaming plans as part of the deal or insist that the HSPA portion of the phone remain unlocked for use with prepaid microSIM cards.

Apple will reiterate all the iOS5 benefits, including iCloud. There may be a 64 GB version for folks like me who have way too much content to fit into 32 GB. Oh, and it will be thinner (it's always thinner).

3. Apple updates the iPod line with new colors, tweaked designs, and a smaller nano that is designed to work well as a watch.

September is traditionally when Apple updates the iPod line, and while pushing out the launch date on the iPhone means that the smartphone will get the lions share of attention, there is no reason to think Apple will neglect the iPod. You might wonder, "what's the point, aren't iPod sales declining?" They are, though even in decline the iPod is still selling millions of units a quarter. The iPod has always had an element of fashion to it, and annual updates are a key part of its success.

This scenario would leave Apple with a much improved iPhone at the high end both in terms of hardware and software, it would put an entry level iPhone at Verizon Wireless, and would give retailers a refreshed iPod line. Apple would be set to break all kinds of sales records with the new iPhones, but this would be widely positioned in the press as a disappointment since none of the wilder rumors were borne out.

If the above scenario is not guaranteed, it is at least extremely plausible. However, there are reasons to believe that Apple could deliver more than that. In my next column, I'll explore what would constitute a Worst Case Scenario (for Apple's competitors).

Apple Rumor Column Disclaimer: Avi Greengart is the Research Director for Consumer Devices at Current Analysis. He is a market analyst, and he holds no stock in Apple or any other individual tech company. All wild guesses in this column are his own and are not based on specific information from the hairdresser across the street from a factory in Shenzhen making cases for the iPhone 5, Cupertino bartenders, or DigiTimes.