Bull Vs. Bear - iPhone 5 Lacks Features To Stave Off Competitors

Question: With its competitors offering similar smartphone products at a cheaper price, will Apple fall behind the competition?

Bear's Response
There's no doubt that consumer technology firm Apple (Nasdaq:AAPL) is a giant in the industry. By creating high-tech gadgets that "none of us knew we needed," the firm has made millions for its investors. Apple's market cap remains at the top of the world and the firm continues to mint healthy cash flow and pay good dividends. I can't help but wonder, however, whether the Cupertino, California-based company may finally be losing its technology mojo. While pre-sales for the newly announced iPhone 5 have been swift - selling more than 2 million iPhones in less than 24 hours - many tech gurus opine that the smartphone lacks wide consumer appeal and the "wow factor" which has become synonymous with Apple's products. When Apple released the iPhone 4, it was generally considered to be light-years ahead of the competition. The firm's latest offering - at least based on specs - seems to now be behind.

Discount Brokers Comparison: Your one-stop shop for finding the perfect broker for your investments.

While Apple isn't going away anytime soon, given the lackluster launch of the iPhone 5 and the disappointing range of products to come out of its Worldwide Developer Conference last June, investors really have to wonder whether losing Steve Jobs has finally begun to catch up with the firm.

Zero "Wow" Factor
With various competitors such as Nokia (NYSE:NOK), Samsung and Motorola going all-out to court consumers and gain market share, Apple seems to be taking the safe approach with its latest round of technology offerings. The company has arguably failed to launch any ground-breaking products since the release of the first iPad in April and iPhone 4 in June of 2010. Since then, Apple has focused solely on incremental upgrades across its entire line of products - and therein lies the problem.

The ground-breaking seems to be gone. There is no Steve Jobs magic with Apple's latest high-tech gizmos. Nothing new to turn heads. The iPhone 5 may have placated the various Apple fanboys, but the smartphone has failed to surprise the bulk of consumers and tech experts. Overall, Apple has always been known for its golden touch and its ability to be a market innovator rather than a follower.

For example, back in 2011, when the company upgraded the iPhone to the 4S, it added the voice interaction feature called Siri. That feature was certainly a welcome surprise to consumers. Voice recognition has now, however, become almost a standard feature. Samsung's new S-Voice function on its phones and its partnership with Nuance Communications (Nasdaq:NUAN) to put Dragon voice recognition software on its Ultrabooks are prime examples of how the rest of the group has caught up to Apple.

Innovate or Die
Yet, with the iPhone 5 launch, the improvements Apple added came up pretty short - especially when compared to its rivals' new products. A perfect example is screen size. The new iPhone sports an enhanced four-inch screen. By contrast, Samsung's Galaxy SIII and the Nokia Lumia 920 are both a little larger. While the iPhone's new size is an increase, it still falls short of competing devices, as the industry norm in the high-end smartphone world is four inches or larger.

When it comes to technology, particularly in the fickle consumer space, companies must innovate or they will find themselves falling by the wayside. Just ask investors in Kodak (OTC:EKDKQ) or Research In Motion (Nasdaq:RIMM). While I'm not suggesting Apple will be a bankrupt penny stock anytime soon, the day it stops building insanely great and innovative products, is the day the music stops. The latest round of product launches could be a sign that that innovation is starting to fade.

SEE: Can Samsung Compete With Apple's Retail Stores?

The Bottom Line
While Apple has a history of being an innovator in the consumer technology space, its latest products are falling short in terms of a "wow" factor. That could mean the Cupertino-based giant is losing its technology mojo. For long-term investors, that's certainly something to consider, given how fickle consumers in the sector are.

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

Don't forget to read the Bull Side of this debate and weigh in with your opinion below.