Stakes are high for Apple at product launch

Stakes are high for Apple at product launch
IPhones will attract a lot of attention at Tuesday's event; they account for most of Apple’s revenue and profit and are the most popular smartphone line in the U.S. Above, a Chinese man talking on his smartphone walks into an Apple store in Beijing last week. (Andy Wong / Associated Press)

Three years into his tenure running Apple Inc., Chief Executive Tim Cook is on the cusp of a defining moment.

On Tuesday, if numerous reports are correct, Apple will unveil its long-awaited smartwatch, along with two bigger (and some say long-overdue) versions of the iPhone. Also expected are a mobile payment service and greater integration of health and fitness monitoring services unveiled this year at the company's developers conference.


Cook, 53, has taken his share of heat from those who say he lacks the vision and execution of his predecessor, the late Steve Jobs. For months, Apple has faced criticism that it is resting on its laurels by letting current products speak for themselves instead of inventing new ones.

If an iWatch is announced, it would be Apple's first brand-new product category under Cook.

Brian White, an analyst at Cantor Fitzgerald, called the event "the most widely anticipated new product unveiling in the tech world this year." Even that may be an understatement.

Apple manages to make every product announcement feel grandiose, even when the advances or upgrades are trivial. But this time, there's more at stake.

Apple seems to be playing into the hype by holding the announcement in the larger Flint Center for the Performing Arts in Cupertino, rather than the town hall on its nearby campus, and live-streaming the event at 10 a.m. Pacific time. It wants as many people as possible to get a look at what's coming.

As always, the iPhones will attract a lot of attention; they account for most of Apple's revenue and profit and are the most popular smartphone line in the U.S. Apple is playing catch-up with bigger iPhones, given Samsung's success selling oversized smartphones and growing interest in large-format phones in China and emerging markets.

But it's the other announcements, the smartwatch and mobile services, that ultimately promise to give the greatest insight into Cook's leadership and Apple's future.

Like many products and services introduced by Apple, they're not wholly original ideas. Companies have been making smartwatches for years. And there's a gaggle of companies trying to ignite mobile payments and health-related digital services. But none has taken off in a big way.

The same was true of digital music players, digital music downloads, smartphones and tablets before Apple came along with the iPod, iTunes, the iPhone and the iPad.

Apple could again be unveiling a game changer.

"If Apple announces a wearable tomorrow, it will fully launch — and dominate — the wearables market through 2015," according to Forrester research published Monday. "Apple will succeed where companies like Nike, LG and Samsung have experienced spotty success."

And in a note to investors Monday, Cowen & Co. analyst Timothy Arcuri predicted: "It just may be — dare we say — different this time."

"The imminent iPhone 6 + iWatch + iOS8 launch sets up much better fundamentally versus previous high-profile Apple products launches," Arcuri wrote. "The stock is still no more expensive relative to the market than during any of the previous three iPhone launches, while this year's new products and services likely have much greater long-term growth potential."

Still, Apple shares have outpaced the markets in anticipation of Tuesday's event: They're up 30% in the last six months compared with the Standard & Poor's 500 increase of 7%. Shares of Apple fell 61 cents, or less than 1%, to $98.36 on Monday.


Apple has been hinting for months that it has major devices in development and that it has been working to get them just right. That was Jobs' preferred way of doing things, and he was credited with the discipline to keep saying no and sending things back for more work if they didn't feel perfect. In a corporate world, where investors demand more profits and revenues every quarter, Jobs resisted the pressure to pump out products as quickly as possible.

Cook appears to have taken the same approach, and believes that users are now ready for a smartwatch and that the technology has evolved enough to make for a solid experience.

If he is successful with the iWatch — and with mobile payments and health monitoring too — analysts say it will help restore some of that old Apple magic.

"We see iWatch as an important barometer of the company's innovation capabilities under the leadership of Tim Cook," Morgan Stanley analyst Katy Huberty said in a recent note to investors.

It will still take a couple of years to see how the iWatch will perform over time; estimates vary widely for how many watches the company could ship in its first year. Because of supply-chain issues, the watch might not go on sale for several months, and a high price could deter buyers.

Tech watchers also note that the iPhone and the iPod took a while to ramp up sales. It was the iPad that bucked the trend by becoming a blockbuster right out of the gate.

In the short term, the unveiling Tuesday will reveal whether Apple can still be the company that its fans want it to be.