Why The Disappointment Over The iPhone 4S Launch Means Nothing

One of the curses attached to dazzling the world again and again is that people expect you to keep doing it. There’s no question Apple (NSDQ: AAPL) failed to dazzle Tuesday during the first iPhone event after the departure of co-founder and legendary CEO Steve Jobs, but does anyone really think Apple has squandered its position in the mobile world by using a product launch to address some weaknesses rather than pushing the envelope?

It’s the fourth year of the iPhone Revolution, and the newest iPhone probably represents one of the most ho-hum launches that Apple has seen in the short history of the product. The iPhone 4S unveiled Tuesday is 16 months removed from the iPhone 4, a gap which had many thinking that Apple had something much stronger up its sleeve based the fact that it deviated from its usual 12-month launch schedule. Instead, we saw a nearly identical iPhone 4 emerge from One Infinite Loop Tuesday, albeit one with a faster processor, better camera, upgraded antenna, and an intriguing voice-recognition application that Apple is sure to market with a sledgehammer over the upcoming holiday season.

You’d think new Apple CEO Tim Cook and marketing chief Phil Schiller had slapped an aluminum case on a 2005 Motorola (NYSE: MMI) Razr by the reaction of many who followed the event in person and on live blogs that groaned under the weight of perhaps unprecedented interest in a new phone. Erik Sherman of BNET went so far as to call the launch of the iPhone 4S “one of the biggest business flubs Apple has seen since the 1980s,” a statement which is laughable in its hyperbole.

Yes, the iPhone 4S is arguably the smallest leap in iPhone capability since it was first introduced. And yes, many of the features introduced on that device can already be found on competing devices running Google’s Android, like voice-recognition search and navigation, wireless software updates, and dual-core processors.

But consider three numbers: 16.24 million, 18.65 million, and 20.34 million. Those numbers equal the number of iPhones sold in the fourth quarter of 2010, and the first and second calendar quarters of 2011. Those iPhones were at least a year or more old when Apple hit the 20-million mark in quarterly unit sales, which was more than any other smartphone company in the world sold during the same period. Clearly, people around the world have seen value in the iPhone 4 and iPhone 3GS despite the fact that some sort of upgrade was coming in 2011 and the basic design was old.

The iPhone 4S is better than the iPhone 4, right? Maybe it’s not as advanced as some had hoped (LTE support is probably the most notable omission), but nor is it a step backward. The impact of the faster processor will continue to cement iOS as the mobile gaming platform of choice, and the iPhone was already the most-used camera on Yahoo’s Flickr service before Tuesday’s upgrade. And imagine if Apple’s new antenna design–touted to improve voice connections–actually makes the iPhone a phone that people don’t mind using.

Siri is likely a wild card. Apple’s demonstration video for Siri was impeccably done and the technology could entice busy multitaskers to upgrade when they might have otherwise sat out this launch. But voice-recognition technology is notoriously flaky. And in one of the most un-Apple developments I’ve seen in a long time, Siri is being launched as a “beta” product, a curious Google-like move from a company that generally prides itself on waiting until it believes something is perfect before letting the public put it through the paces.

For the most part, this seems like one of those occasions where Apple has done a poor job of managing expectations. iPhone rumors are always a crapshoot, but so many this year were focused on the notion that there would be an “iPhone 5,” a next-generation model that would restore a magical sense of child-like wonder and all that jazz.

One of the smarter aspects of Apple’s obsession with product secrecy is that the company can never be pinned down as having failed to live up to expectations: if you never say what you’re doing to do or when you’re going to do it, no one can ever call you on having missed the mark. But it also means that others can define what it is that they think your company should do in the absence of any official guidance, and proclaim later efforts as a failure because they didn’t live up to their own expectations.

It seems very likely that Apple did have grander plans for the iPhone in 2011 but for whatever reason, just couldn’t make them work, which is why the company will ship basically the same phone design with upgraded components for the holiday season instead of forcing something incomplete out the door. But those who believe Apple has erred with the iPhone 4S are overlooking the fact that the iPhone remains the most prominent smartphone (not operating system, but actual phone) on the market among both consumers and software developers.

Software developers aren’t going to abandon the iPhone platform because the iPhone 4S launch failed to usher in a new flashy hardware design or an LTE chip. iPhone 4 owners might not decide to upgrade based on this product, but 55 million of them bought an iPhone 4 over the last nine months and therefore probably aren’t eligible for an upgrade anyway.

Meanwhile, Apple made that iPhone 4 more affordable to the millions of people that will likely buy their first smartphone in 2011. “Now the big growth in the smartphone space is not coming from people that need a new phone every three weeks. It’s your brother or your cousin or your aunt,” Charles Golvin, an analyst for Forrester Research, told The New York Times.

Google and Samsung are going to have a major event next week at CTIA to likely announce the next-generation flagship Android phone, and Nokia and Microsoft are likely to unveil the first fruits of their Windows Phone 7 efforts over the next two weeks. Those phones will be competitive against the iPhone 4S, no doubt: Apple didn’t land a knockout punch with this launch.

However, Android faces the same problem it always has in attracting developers to spend as much quality time on its platform as they do on Apple’s, not to mention the additional long-term problem of what Google’s Motorola acquisition means for the overall market. And Nokia and Windows Phone 7 have both struggled to gain any traction in the U.S.

In other words, Apple and the iPhone aren’t going anywhere, despite the fact that the iPhone 4S did not overwhelm Silicon Valley. Should Apple take another 18 months to release another modest update, then they might have a problem.

But the iPhone 4S is not the Mac Perfoma.