Last updated: October 5, 2011 12:27 am

Apple unveils modest iPhone update

Apple’s keenly awaited latest version of its flagship iPhone initially disappointed investors on Tuesday, as new chief executive Tim Cook’s debut product launch failed to meet expectations.

The iPhone 4S looks very similar to the iPhone 4 but includes a faster chip, a better camera and a voice-recognition feature that takes dictation and processes naturally asked questions such as “Do I need a raincoat today?” and “How is the Nasdaq doing today?”

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Investors who had been looking for more dramatic improvements to be unveiled on Tuesday sent Apple shares down more than 3 per cent by mid-afternoon in New York, though they recovered most of that ground amid a broader market rally.

The phone includes a dual-core A5 processing chip, first introduced in the iPad 2, which Apple said made it as much as twice as fast as the previous iPhone. The phone also switches between two antennas to optimise call quality and double the speed of downloads, said Phil Schiller, Apple’s marketing chief. It has both GSM and CDMA capability, so that it can switch among networks around the world.

Mr Cook, under scrutiny in his first meeting with the press and analysts since succeeding the ailing Apple founder Steve Jobs, maintained his low-key style and said the critical advantage for Apple was its ability to combine hardware, software and services “in such a powerful yet integrated experience”.

FT Tech Hub - Apple launch

FT Tech Hub

Follow events as Apple revealed the upgraded iPhone

In addition to the new handset, Apple said the fifth full version of its iOS operating system for iPhones and iPads would be available free from October 12. It has tighter integration with Twitter, less intrusive notifications, and a Newsstand application that refreshes magazines and newspaper content.

In services, Apple said its previously announced iCloud storage system, also free from the same date, would automatically download purchased songs and apps from iTunes to all devices owned by the same person.

The phone business now provides nearly half of Apple’s revenue, or $13.2bn in the quarter that ended in June. The company took in $6bn from its less than two-year-old iPad line and just $5.1bn from sales of its Mac computers, mainly notebook models.

Perhaps in recognition of the increasing challenge posed by handsets relying on Google’s Android operating system, Apple cut many of its prices. The new iPhones will cost $199, $299 or $399 with subsidies and two-year contracts from top US carriers AT&T, Verizon Wireless and new addition Sprint starting October 14. The phones will also go on sale then in the UK, Japan, Germany and elsewhere, spreading to more than 70 countries by the end of the year.

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