The Exchange

3 Reasons the iPhone 5 Won’t Live Up to the Hype

The Exchange

Apple (AAPL) is in trouble.

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Its reputation took a hit last month after the company reported just 21 percent year-over-year profit growth on $35 billion in revenue, and its stock price is only up $100 or so per share since March. CEO Tim Cook took over for company founder Steve Jobs in August 2011 and has yet to release any generation-defining technology or redefine the average person's relationship with software in his 12 months on the job. Clearly, something is amiss in Cupertino.

All kidding aside, Wall Street has truly been concerned about Apple's performance lately. Not because the world's largest corporation is no longer raking in the cash, but because it isn't growing as fast or as consistently as it once did. Fortunately, Apple's latest version of the iPhone, the long awaited iPhone 5, is waiting in the wings, ready to ride in and save the company's revenues all over again. And it couldn't be coming at a better time. Apple's financials fell short of expectations in the third quarter of 2012, due largely to a drop in iPhone sales (which Cook himself blamed on all of the breathless hype surrounding the soon-to-be-released iPhone 5) and more than a few analysts are starting to wonder how long the company's stratospheric growth trend can last.

But can the iPhone 5, which some analysts are predicting will sell as many as 250 million units, live up to the hype surrounding its release? Is there any way the actual product will justify all of the praise being heaped on it? (And remember, most Apple watchers expected the iPhone 5 to launch a year ago, when the 4S made its debut, so there have been almost 12 months of build up.) Of course not; here are a few warning signs.

1. It might require new hardware

Apple is reportedly in the process of phasing out the 30-pin dock connector that's been standard on its mobile devices since the first generation iPod and is replacing it with a new, smaller connection. The good news about all this? It means that Apple will eventually be able to offer thinner, lighter iOS devices; iPhones that are not weighed down by the "bulky" current dock connection. The bad news? Pretty much every iPhone/iPod accessory that's been manufactured in the last decade is now more or less worthless. Buyers of the iPhone 5 will need to order new docking stations, power cords and other accessories when they upgrade, or be prepared to find adapters for all of their legacy accessories. That's the kind of hassle that could annoy potential buyers.

2. It may be overkill for prepaid networks

Five years into its life cycle, the iPhone has lately become a player in the growing U.S. prepaid market, which traditionally caters to value-conscious customers who pay for service on a month-to-month basis. Currently, the iPhone 4 and 4S are available on a prepaid basis from Virgin Mobile (S) and Cricket, although Verizon Wireless (VZ), AT&T (T) and T-Mobile all offer a prepaid service as well for non-Apple smartphones.

But, truth be told, the iPhone 5 might be too much for these providers to support. Virgin Mobile, for instance, runs on Sprint's older 4G WiMax system and can't support the faster LTE technology that's expected to come standard on the iPhone 5. And Verizon's prepaid service is even slower. It only runs at 3G speeds.

As one commenter on Mobilenapps.com put it, running an iPhone 5 on a prepaid network "would be like having a Ferrari with a go-cart engine."

3. It now has some real competition

Whatever happens when the iPhone 5 launches in late September, the iPhone platform itself is now five years old. Sure, the 5 is expected to include some new bells and whistles -- like a more powerful processor, a better camera, an improved operating system and a new case design -- but will that be enough to separate Apple's latest and greatest from the growing herd of imitators?

Fact is, the iPhone is no longer the only player in the smartphone space — thanks to Samsung, HTC, LG and others — and customers looking for a true mobile multimedia experience are no longer tied strictly to Apple. In fact, Google's (GOOG) Android platform has emerged as Apple's primary mobile competitor, accounting for 68 percent of the global smartphone market last quarter, according to research firm IDC. Compare that to the 17 percent market share held by Apple.

We can debate all day whether or not this is a good thing for consumers (answer: it's a great thing), but the fact remains that, for Apple, increased competition in the mobile space has and will continue to eat into its bottom line. And, for the iPhone 5, the bar for "new and unique" will be higher than ever before.

What do you think? Are you excited about the upcoming iPhone 5 launch, or do you feel the hype is overdone?

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