New Apple iPhone not expected to have many changes

Jefferson Graham | USA TODAY

LOS ANGELES — Don't expect to be overwhelmed when Apple unveils its latest iPhone upgrade next month — analysts expect few changes.

The current model, the iPhone 5, saw a larger screen, improved resolution, an upgraded camera and new charging cable. The new 5S, as analysts expect the new phone to be called, will follow the usual drill — faster processor, improved camera and more storage, says Gene Munster, an analyst with Piper Jaffray.

"This is an incremental release," Munster says.

Apple could use a new hit. Its once iron-clad grip on the smartphone market has taken a tumble.

In the second quarter, Apple again saw its market share fall. Researcher Gartner on Wednesday said Apple's share fell to 14.2%, from 18.8% in the year-ago quarter. Market share climbed to 79% for phones from a variety of companies running Google's Android operating system, up from 64.2% the year before.

Apple sold more phones in the quarter — 31.9 million, up from 28.9 million a year ago, but there's a huge gap between Apple and No. 1 ranked Samsung, which sold 71.4 million smartphones, up from 45.6 million.

Apple's solution is to offer a cheaper, plastic version of the iPhone in addition to the new 5S for cost-conscious consumers, a segment where Android is strong, says Van Baker, an analyst with Gartner.

What's been dubbed the iPhone 5C (for "cheap") on Apple online rumor sites "will help bring in new buyers," says Baker.

Apple has offered low-price versions of older models; the three-year-old iPhone 4 is offered for free with a two-year contract by most carriers. But that's not enough. "It has to be a new phone, not an old phone," says Baker.

The bigger impact from the lower-price phone will be in emerging markets, such as India and China, where phones aren't sold subsidized as they are here. Munster expects the "C" to sell for $350, down from the $450 Apple has been charging for an unsubsidized iPhone 4. "That will be a huge deal for people," he says.

Even if the new iPhone 5S isn't a major change from previous models, Apple will still "sell a gazillion of them," says Baker.

"It doesn't have to be earth-shattering for them to sell. There's enough people who want the latest and greatest from Apple."

Apple rumor websites have floated possibilities such as a bigger screen for the new iPhone 5S and even fingerprint technology for security, but Munster and Baker don't expect either of those. Munster says Apple is holding big innovation for 2014, which he believes will see the introduction of an Apple TV product and a connected watch that will interact with the iPhone.

Meanwhile, investors have been hitting Apple for not launching breakthrough products in the post-Steve Jobs era, and Apple has seen its stock price fall 5.4% this year to slightly more than $500 a share. The stock has gotten a lift this week from comments by activist investor Carl Icahn, who described it as "undervalued."

But the damage for a likely introduction of a new iPhone just slightly different from the iPhone 5 has already been done, says Munster. "The stock started to fall off after the iPhone 5 came out when investors realized the follow-up would be incremental. The underwhelming part of the iPhone 5S is already factored into the stock price.

"The substance of the announcement is the cheaper phone," he adds.