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After the hype fest.

Now that Apple has finished telling the world how it innovates features the competition has had for ages, my iPhone 5 preview was right on the money. There’s very little new here and the 4S owner has little reason to upgrade.

The Hypephone 5.

The camera lens is now 33mm FFE down from 35mm. Immaterial. The definition remains 8mp but is actually lower than in the 4S as the same number of pixels is distributed over a larger area. Apple claims the reaction time is 40% faster and that is meritworthy, though the 4S is no slouch. And the panorama mode, where you hose the camera around and it stitches the images, is exciting, though Sony had it years ago. Heavens, even the klutzes at Fuji, who would not know good code if it hit them, had it in the X100 two years ago. The camera can now record still images while making a movie. Don’t see who would need that.

But there is one bit of really exciting news for iPhone 4S owners. On September 19 iOS6 becomes available and will add the panorama mode to the 4S. Now that is worth waiting for.

As for Apple, they really need to think different, as their ads once had it. There are at least two trillion dollar businesses crying out for the company’s design chops. Domestic appliances – everything from thermostats to kitchen controls, and in car systems. Both are ergonomic wastelands (have you ever tried the catastrophic iDrive in a modern BMW? It should be called iCrash). Think different or die.

And how about taking some of that $120 billion in cash and buying one of the major TV studios? Anti-trust be damned. Politicians are cheap. With one studio providing content for an Apple TV set, the others will quickly sign distribution agreements. (Please, no Fox ‘News’ though). C’mon Apple. Wake up. The Jobs product pipeline does not have far to run and you are sitting on your laurels with incremental product upgrades which are easily mimicked by the competition.

Ummm, diversification, anyone?

A disappointment which will sell well.

With discretion and confidentiality being concepts of the past, the forthcoming iPhone5, to be announced on September 12 and on sale September 21, has been the most leaked iPhone design ever, despite Tim Cook’s commitment to tighten up security. Here’s what we know:

• Same width as the iPhone 4S.
• Half an inch taller for 16:9 widescreen rather than 4:3. Largely useless.
• LTE 4G cellular, meaning AT&T can cease lying about 4G (my AT&T 4S says ‘4G’ when it’s ‘3G’).
• Thinner, owing to integration of touch sensors into the LCD panel.
• Better battery life, maybe as good as the competition.
• A smaller dock connector, just to make sure 50 million users of accessories get upset.
• Maybe an even better camera sensor to update the already excellent 8mp one in the 4S, the biggest update from the previous model 4. OVTI’s pop in share price and revenue predictions suggest this may be so; they make the sensor.
• The global Qualcomm comms chip to permit functioning on any cellular network, including China Mobile which has yet to sign with Apple. China Mobile accounts for 50% of Chinese cellphone users.
• A faster A6X ARM CPU.

Here’s what we likely will not see:

• Near Field Computing. NFC is the technology which will replace credit cards and drivers’ licenses, storing that data encrypted in the phone and transmitting it by a proximity wave to the reader in the retailer’s store. Or cop’s cruiser …. In an insightful piece, one of the best tech sites around, AnandTech, has concluded there is insufficient space inside for an NFC chip, further hampered by a reversion to a metal back, compared with the current glass one.
• A proper sized screen. Having sued and prevailed over Samsung’s copycat efforts, and rightly so, Apple is likely finding it hard to argue for the right-sized screen in Samsung’s Galaxy III phone. As regards those who damn Apple’s intellectual property efforts, they forget two things. Apple has paid its share of penalties for IP infringement. And how would these critics feel were it their IP which was being stolen?
• Biometric technology. Apple recently bought biometric security (fingerprint recognition, retina scans, etc.) AuthenTech for $356mm which brings with it the thrilling prospect that I will no longer have my credit card number stolen annually by Russian hackers. You will access your iPhone with your fingerprint, no more easily guessed passwords for thieves. The thieving sales clerk will no longer see your CC number. And, once licensed, customers of WalMart will be able to check out with a fingerprint which is an improvement over the ‘X’ they currently struggle to write on the credit card machine’s screen.

In a nutshell, if the above is right – and I pray it is not – the iPhone 5 is a useless 0.5″ longer than the iPhone 4S and represents little more than tinkering at the margin of the current design, while increasingly falling behind the best of the competition, stolen as many of their designs may be. 4G is nice for the 2% of the cellphone world which has access to it. Verizon 4G on my iPad3 is outstanding in the Bay Area, by the way. AT&T’s 3G on my iPhone 4S is anything but.

Yet despite that litany of disappointments, it will be a massive success, for several reasons:

• The Apple ecosystem. You can argue, correctly, about the dated and confusing design of iTunes, but a relatively stable iCloud and high integrity email and related applications not only tie in existing users but also attract those brutalized by Android and Windows.
• There is no earthly reason to think that Microsoft’s Windows 8, promising everything to everyone, will be any more successful than the disastrous Vista. iOS and the iPhone/iPad were in development 5 years (500 man years?). Why on earth would anyone think that Microsoft, famous for poor UIs and a cynical disregard for the user experience owing to long vested monopoly power, should succeed with an immature Windows 8 which tries to please both desktop and mobile users? Were I a gambling man I would bet that the Surface tablet will be the Sinker tablet before too long, having successfully upset all of MSFT’s traditional manufacturing partners (Acer, Asus, HP, Dell, etc.) who have had the carpet whipped out from under their feet by MSFT’s sudden decision to become a manufacturer. (Xbox was purchased and remains largely unchanged since, and making mice is not the same as making tablets).
• China Mobile. Apple will soon sign this carrier in China, one who accounts for 50% of China’s cellphone users. The new Qualcomm comms chip in iPhone5 will, for the first time, accommodate CM’s cellular technology. Sure, that does not mean 500 million new sales, but Apple is about profits not market share. Another 10 million at 45% profit margin will do nicely. That figures to $30 or 5% on AAPL’s share price.
• Pent up replacement/upgrade demand from iPhone4 owners who were disappointed by the marginal improvements – camera aside – in the iPhone4S.
• Vanity sales from Apple’s growing share in laptops, where users are introduced to the elegance and quality of Apple’s design work. As one example, the 2012 MacBook Air is an outstanding, attractively priced machine and the Retina Display 15″ MacBook Pro has the best laptop display in the business and will soon be joined by a 13″ model which will further grow laptop share.
• Continuing Apple supply chain dominance with long-term supply contracts signed up with key component makers, not least the three manufacturers of retina displays.

So while I expect the camera to be further improved in iPhone5, yet another nail in the point-and-shoot sector’s coffin, I will be waiting for iPhone6 unless I am significantly mistaken in what I wrote above.

As for Apple’s future, the company has lots of good things in the pipeline but the ones we know about are anything but innovative. The iPad Mini will clean up in the education market (OK, not in US public schools, which hardly qualify as education) at a $249 entry point, and will get no competition from the soon to be introduced Kindle Fire2, which will be heavily advertising supported to direct you to buy more stuff from Amazon.com. Teachers will likely not take kindly to their charges firing up their, err…. Fires only to be confronted with condom ads. Patent litigation will continue for the forseeable future and Apple will mostly prevail, setting back the thieves and forcing them to actually make something original. Everyone wins, but Apple wins first.

The Steve Jobs pipeline of innovative products is ending, so some really new things have to come along for Apple to maintain its torrid pace of growth. I expect that to continue for at least another year, but absent a fresh burst of innovation, the storm clouds will come closer. The replacement market is not a growth business, after all.

Disclosure: Long AAPL, QCOM, BRCM.

Obviousness.

Considering how all the pundits claim that the stock market is stacked against the ‘little guy’, it continues to offer up no-lose opportunities with startling frequency.

In the past quarter alone, had you loaded up on Apple and shorted Facebook and Hewlett Packard, you would now be substantially wealthier. Apple makes things which Asians steal. Facebook is a fraud aimed at impecunious teenagers. And Hewlett Packard has Miss Piggy at the helm. Shareholders must rue her loss in the CA gubernatorial election. Gee, you don’t need a spreadsheet to analyze that lot.

And Friday’s patent decision by a jury in Silicon Valley rightly concluded, despite an arrogant judge who made the error of thinking the jurors were stupid, that theft is punishable by law. At least by American law. The jurors needed no advanced degrees in patent law. A 132 page ‘How to Steal’ Samsung document and sheer obviousness led them to speedily conclude that if it quacks like a duck, it is a duck.

Obviousness.

If, like me, you shelled out $500 for iPhone v1 5 years ago on the day it went on sale, the prevailing memory of that day is of your crashing jaw. Rubberbanding, pinch to zoom, tap to fill, multitouch, icons, the internet in your pocket. All had the same effect on this user’s jaw. And all were faithfully copied by Samsung.

There is a body of opinion out there which has it that this verdict will stifle innovation. The writers, of course, are journalists who flunked Econ 101. The explosion in innovation which will result as cheaters are forced to become designers will astonish and delight.

Meanwhile, do the obvious and make some coin. And your iPhone comes with a great camera, too, soon to get even better, so take some snaps while you are at it.

As for the Apple haters reading this, ask yourself which you hate more. AAPL or $$$$?

By the way, a piece I wrote four years ago which attracted record amounts of hate mail, has just been updated. Like I said, obviousness is a reliable guide.

With the Trinovids, looking into the future. iPhone 4S snap by my son.

Disclosure: Long AAPL, QCOM, BRCM; short FB.