That’s the way things look ahead of tomorrow’s long-awaited product announcement. Just about everybody anticipates two new iPhone models — as well as an updated iOS 7 operating system, and perhaps a Pandora-like Internet music service and a software upgrade for Apple TV — that plug holes in Apple‘s business model but probably won’t dazzle fans who expect the company to dance on technology’s cutting edge. One year after it introduced the iPhone 5, Apple’s iPhone 5S is expected to offer high-end users some modest improvements. It likely will have a more powerful processor, a better camera, fingerprint recognition for security, near field communications, and some new colors. In other words, it will have just enough to reassure iPhone fans that they don’t have to envy Android users who’ll approach the holiday shopping season with several improved choices from manufacturers including Samsung, Motorola, and Sony. But investors will be more interested in the second model, expected to be called iPhone 5C, that Cowen and Co. analyst Timothy Arcuri predicts will be little more than “a glorified iPod Touch with a cellular radio.” Apple shares are down 25.7% over the last 12 months, in part because many don’t see how the company can grow without trashing its profit margins, estimated at about 40% for the iPhone. Apple’s smartphone market share is expected to drop to 17.3% this year from its peak of 20.5% last year. Apple hopes to change that trajectory with the iPhone 5C, estimated to cost about $400 before phone company subsidies vs the iPhone 5’s $650 before subsidies. “The trick is for Apple to position a cheaper device so that it’s attractive for those that haven’t been able to afford an iPhone before, but is missing enough key features for the new flagship iPhone to remain compelling,” says Ovum chief telecoms analyst Jan Dawson. The iPhone 5C, is expected to be distributed by providers including China Mobile and NTT DoCoMo.
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