While the new iPhone 5s and 5c are important to Apple (AAPL), its new mobile operating system iOS 7 may be even more critical to its long-term prospects.
It was designed to reinvigorate the platform against the more modern look of Google’s (GOOG) Android and Microsoft’s (MSFT) Windows 8, but change brings risks. The unfamiliar user interface could confuse existing iPhone and iPad owners.
The new operating system is incompatible with some devices including the original iPad and some features are exclusive to new phones. In addition, the 900,000+ apps in Apple’s App Store must be updated and some developers aren’t bothering; others are charging for updated versions.
Over the next few days, Apple should find out if it has a runaway success on its hands or a PR disaster.
One of the key advantages Apple has over Android is its avoidance of a fractured install base for iOS. Up until the iPhone 5, devices kept the same display aspect ratio and there are still only four different iOS display sizes making development relatively easy — in comparison, Samsung (SSNLF) alone had 26 different display sizes back in 2012 and that was before new product releases this year.
Apple users have always been quick to upgrade to the latest operating system as well. In June, 93% of the 600 million iOS devices sold to date were running the most recent version of Apple’s mobile OS, making it easy for developers to focus on apps that utilize the latest features.
In contrast, just 8.3% of Android devices are on the current 4.2 version of that operating system. More than 30% are running Android Gingerbread, a version of the OS first released in 2010. According to Gizmodo, there are currently something like 12,000 different Android devices in use.
This advantage is one of the reasons why Apple’s App Store still dominates Google Play for app revenue, pulling in double the revenue despite the fact that Android dominates mobile platform market share. As an app developer, would you rather target the 93% of 600 million iOS devices running the current iOS, or the 8.3% of the billion Android devices running the latest operating system?
Android developers can access a larger market by adding compatibility for older versions of the operating system, but this adds to development time, testing time and cost. So many new Android apps actually have a smaller potential market than iOS versions, despite Android’s lead.
But the release of iOS 7 changes things.
Apple is abandoning some iOS devices, including the original iPad. That’s 15 million or so iPads that are still functional enough to fetch several hundred dollars getting left out. The iPhone 3GS also got dropped. And while previous iOS releases have already stranded the original iPhone, we’re reaching the point where there are significant numbers involved.
In addition, many devices that support iOS 7 don’t have access to all the features, meaning the number of iPhones, iPads and iPods that lack access to OS-level functions is growing.
Another threat is that thriving app ecosystem. Many existing apps haven’t been upgraded to iOS 7. Besides looking bad, reports show that 90% of apps that haven’t been upgraded either crash or don’t work properly when used with iOS 7. The changes required can be significant enough that some developers are charging users full price (treating the iOS 7 version as a new app) instead of the customary free upgrade.
All of the above, plus the customary rush to download the latest and greatest version of iOS (which often overloads Apple’s servers) has the potential to turn the release of iOS 7 and the new iPhones into a PR black eye for Apple instead of a triumph.
The company is acutely aware of the risk and taking preventive measures. 9to5Mac says Apple is letting customers who installed iOS7 on their device roll it back if they change their minds — something it doesn’t normally do. A few days ago, the App Store gained a feature that offers users the option of downloading the last compatible version of an app, helping prevent scenarios where older devices owners try to install incompatible iOS 7 apps.
Apple also upped the app size limit over wireless networks (there’s no Wi-Fi cap) to 100MB to allow for bigger files that contain multiple binaries (for both the 64-bit iPhone 5s and the rest of iOS devices which run 32-bit code).
According to Forbes, within 24 hours 18% of iPhone and iPad owners had already upgraded to iOS 7 so the launch is off to a good start. Apple isn’t out of the woods yet, though. The next week or two will be critical as people adjust to iOS 7 (or not) and any app fallout hits.
And while it will be nowhere near as bad as the Android camp, as the iOS 7 upgrade cycle winds down, Apple’s mobile ecosystem will be a little more fragmented than it was last week.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.