Apple Event Sparks High Expectations

SAN JOSE, Calif. (San Jose Mercury News/MCT) -

He may not be a natural under bright lights, but Apple CEO Tim Cook has grown more at ease on stage in recent years, unveiling new iterations of the iPhone with panache.

What he needs to show now, analysts say, is a device with his fingerprints on it.

After a series of underwhelming product launches, technology watchers are hopeful that Apple will reveal a brand-new device for the first time since Steve Jobs’s death at an event Tuesday at the Flint Center for the Performing Arts in Cupertino, Calif. Apple refuses to share what it has in store, but many analysts predict that Apple will release a wearable device such as a smartwatch, along with a pair of iPhones with larger screens. Wearable devices have yet to catch on among mainstream users, but that leaves Apple room to define the market, a role it relishes.

“They might be rewriting the history books, as they did for tablets and smartphones,” said Matt Margolis, an analyst at PTT Research.

Of course, making history is a tough order to fulfill. Apple’s stock has soared to new records in recent weeks in anticipation of its new products. Some analysts fear that leaves the company with nowhere to go but down. Andy Hargreaves, an analyst at Pacific Crest Securities, wrote in a note last week that none of the products Apple reportedly has in the pipeline promises the massive revenue growth investors have long wanted to see.

“We recommend taking profits in Apple,” he wrote.

Analyst Carolina Milanesi doubts a wearable device will yield the gusher of profit that the iPhone did for Apple. But the device could prompt customers who haven’t been swayed by Apple thus far to give the company a second look, she said.

“I expect Apple to use the device as a hook rather than a cash cow,” said Milanesi, who is chief of research and head of U.S. business at Kantar Worldpanel ComTech.

What’s more, Milanesi said, the wearable gives Apple a chance to strengthen ties between its devices, upping the odds that customers will buy another product. Many predict that the wearable will be a tool for monitoring health and fitness. It will likely work best with the iPhone, Milanesi said.

“For Apple, there is a bigger game,” she said. “It’s about one ecosystem of devices working together to strengthen the appeal of the brand and make users more loyal.”

But Apple is not ignoring the iPhone, still the engine of its sales. The company is widely expected to roll out devices with screens of 4.7 and 5.5 inches, at last responding to the call for bigger phones from the market. Tim Bajarin, President of Creative Strategies, said he expects the move to drive strong profits for at least the next two years.

“There is huge, pent-up demand for a larger iPhone,” he said.

Apple may also win back some customers who defected to manufacturers like Samsung for bigger screens, said Ramon Llamas, a research manager at IDC. Apple is also trying to entice them with a new operating system that features applications for monitoring health and makes it easier to move content between devices. In addition, the phone will reportedly feature near-field communications technology to make mobile payments easier.

The seven-year-old iPhone still triggers a frenzy in the market. Some consumers in New York are already lining up to buy the latest version of the device.

Many are skeptical that consumers will be so eager to wear Apple on their person. But Bajarin is convinced that Apple would not return to Flint Center without a product it was confident in. The venue, site of the original Macintosh’s launch 30 years ago, seems like a “historic wink,” he said.

“Apple doesn’t overpromise,” he said. “They raise expectations in a measured way and then they over-deliver.”