Sep 9, 2014

For Apple CEO, Launch Is Biggest Test

After three years of closely guarding his strategy for Apple Inc., AAPL -0.62% Chief Executive Tim Cook will show his hand Tuesday, with an ambitious blitz of new products and services that aim to resolve questions about the company's ability to innovate.

Apple is expected to unveil two new iPhones with larger screens, its first wearable device—a smartwatch—accompanied by new services around healthcare, home automation and digital payments. It's the type of new-product wave that Apple fans have been waiting for since Mr. Cook succeeded Steve Jobs in August 2011.

"It seems really clear that Apple intends to make a big splash," said Forrester principal analyst James McQuivey.

Apple is trying to prove that it can still deliver the type of groundbreaking products that vaulted it from the brink of bankruptcy to become the world's most valuable company by market capitalization. It established itself as a leading innovator by redefining the mobile phone in 2007 with the iPhone, and the tablet computer in 2010 with the iPad.

More recently, Apple's technological ambition has seemed to pale, compared with rivals like Google Inc., GOOGL +0.64% Facebook Inc. FB +0.82% and Inc. Google is tinkering with driverless cars, aerial drones and a network of connected home devices through Nest, started by ex-Apple employees. Facebook is buying virtual reality headset maker Oculus and paying $19 billion for messaging service WhatsApp. Amazon is making set-top boxes and phones, and recently bought Twitch, a popular network for watching videogames.

By revealing new hardware products together with service offerings, Apple is trying to show how it can create experiences that can't easily be replicated by competitors, to keep users loyal at a time when Google's Android mobile-operating system runs about 85% of smartphones.

Google, Facebook and Amazon all are essentially software companies that are trying to find their stride in hardware. Amazon Monday cut the price of its two-month-old Fire phone to 99 cents, a signal it hasn't been selling well. Apple's most prominent hardware rival in terms of sales and market share, Samsung Electronics Co., is weaker on software and services.

Mr. Cook started raising expectations for a wave of new products in October 2013, when he told investors they would see "some exciting new products from us in the fall of this year and across 2014." In April, he said he felt "really great" about forthcoming products. Eddy Cue, Apple's senior vice president in charge of online services, recently said Apple has the "best product pipeline" he's seen in 25 years at the company.

Investors are also feeling bullish. Apple's share price has risen 38% over the last year, reaching all-time highs earlier this month before pulling back last week. On Monday, Apple shares closed down 0.6%, or 61 cents, to $98.36.

Tuesday, Apple is expected to unveil two new iPhones with larger 4.7- and 5.5-inch screens. The larger displays are expected to fuel a big upgrade cycle because Apple has stuck with smaller screens even as customer demand started shifting to larger smartphones. Apple last increased the iPhone's screen size in 2012, to four inches from 3.5 inches.

The company is expected to announce that it is entering a new product category with a smartwatch with a curved display. Engineering snafus may prevent Apple from selling the watch during this year's holiday shopping season. If it doesn't go on sale until next year, Mr. Cook will have failed to deliver on his promise of entering a new product category in 2014.

Tuesday's announcements won't be just new hardware. Apple is set to unveil new approaches to tackle thorny issues that have confounded technology companies—and their customers—for years. It is expected to demonstrate how the new devices will help people track and monitor their health, while equipping the new iPhones and wearable device with wireless technology for digital payments.

The venue—the Flint Center for the Performing Arts on the De Anza College campus about 1 ½ miles from its Cupertino, Calif., headquarters—carries a historic meaning for Apple. The company hasn't held a new product unveiling there in 15 years, often choosing smaller venues such as the Yerba Buena Center in San Francisco or a Town Hall building on its Cupertino campus.

Mr. Jobs unveiled the Macintosh computer at the Flint Center in 1984, and the iMac there in 1998, after he returned to the company. "The very fact that they are holding it at the Flint is a signal that they are expecting this to be big," said Mr. McQuivey.

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