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TECHNOLOGY

Apple seeks to raise bar with iPhone 5

The new phone is Apple's thinnest, lightest, fastest and most powerful and is expected to sell millions

September 13, 2012|Jessica Guynn and Andrea Chang
  • Justin Sullivan / Getty Images
Justin Sullivan / Getty Images (ma8yf9pd20120912101609/600 )

SAN FRANCISCO — It's the thinnest, lightest, fastest and most powerful phone that Apple Inc. has ever made.

But will that be enough to keep surging smartphone rivals from nipping at its heels?

Many analysts think so, saying the latest in a series of six iPhones that have enticed consumers and helped Apple become the world's most valuable company promises to again raise the bar for smartphones.

Every inch of its flagship product was painstakingly designed to keep Apple at the forefront of the industry and keep its fans coming back for more, they say.

Apple has the strongest "gravitational field of loyalty," Forrester Research analyst Charles Golvin said. He expects the iPhone 5 will increase Apple's magnetic pull. And getting cozier with consumers will be crucial for Apple as the mobile wars heat up.

It's competing against rivals Amazon.com Inc., Google Inc. and Microsoft Corp. to become -- in the words of Apple's late co-founder, Steve Jobs -- the "digital hub" in people's lives, the place they go to watch movies and TV shows, listen to music and read books.

"This is no longer a battle over individual devices," Golvin said. "This is about an entire set of experiences that span phones, tablets and PCs."

Analysts are betting that Apple will sell tens of millions of the new device. The iPhone5 will start at $199 with a two-year wireless contract. The phone will be released Sept. 21, and customers can start pre-ordering Friday.

Apple shares rose $9.20, or 1.4%, to close at $669.79 on Wednesday.

"IPhone 5 is the best phone we've ever made," Philip Schiller, Apple's senior vice president for worldwide marketing, said as he introduced the device during a splashy invitation-only event in San Francisco. The event starred Apple Chief Executive Tim Cook and the Foo Fighters, who performed several of their hits.

The iPhone is about 18% thinner and 20% lighter, which thrills Gina Pomponio, a 39-year-old blogger from New York, who says she's hooked on Apple.

Pomponio plans to ditch her iPhone 4 and upgrade to the iPhone 5 as soon as her contract is up in February. She revealed she was pregnant with her first child by taking a picture of her baby bump with her iPhone.

Now pregnant with her second child, she used her iPhone to send the sonogram to friends. She said she organizes her entire life on her iPhone.

Is she an Apple customer for life? "I would definitely say so," Pomponio said.

Analysts say Apple will benefit from that kind of customer loyalty and pent-up demand for the new iPhone. Anticipation of the iPhone 5 hurt iPhone sales, leading to a rare earnings miss by Apple.

Consumers will be drawn to the new phone, which has been reengineered inside and out, said longtime Apple analyst Tim Bajarin, president of Creative Strategies Inc. He predicts Apple will have a "monster" quarter during the all-important holiday shopping season as consumers whose contracts are up rush to upgrade.

"When you touch it, it almost feels like fine jewelry, it's so well-crafted," Bajarin said. "People are going to realize once they touch it that this is not the same iPhone that has been on the market for the last five years."

That said, there weren't many surprises. "The iPhone 5 was essentially as expected," Sanford C. Bernstein & Co. analyst Toni Sacconaghi said.

But, he noted, the rollout is faster and more aggressive, hitting more countries more quickly than previous iPhone launches.

"Apple could sell significant amounts of iPhone 5s prior to the end of this quarter, potentially 10 million or more," Sacconaghi said.

Still, some wonder if the post-Jobs Apple can keep up with competitors who were first to market with phones that boasted larger displays or ran on faster wireless networks. Apple, which was once the bestselling smartphone in the world, has ceded market share to new devices such as Samsung Electronics Co.'s Galaxy line, slipping to second place behind Samsung. Now, Microsoft is pushing its Windows Phone 8 operating system as an alternative to Apple and Google's Android.

And consumers can be fickle. Apple will be only as good as its latest gadget, said Adam Cohen, 32, director of marketing for J&R Jr. in New York. Cohen plans to order the iPhone 5 right away. He has the Samsung Galaxy S III, but complains it doesn't work as well as his iPhone.

But, he said, "I am a product guy. When Apple's products start slowing down and products from competitors get better, I would look to move."

That's why Apple is looking to add features and accessories that keep Apple customers coming back, such as the larger, 4-inch retina-display screen, the first time Apple has changed the dimensions since it started making the iPhone.

The iPhone 5, which will be available in white and slate black, weighs 112 grams, or about 4 ounces, has a processor that is twice as fast as its predecessor, high-speed 4G LTE connectivity and a widescreen aspect ratio.

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