Apple iPhone 5 to get minor update, 'revolutionary' software

Apple said yesterday that it plans to roll out a number of major upgrades to its software platforms, leading analysts to believe that it will be these changes that will define the iPhone 5, not necessarily the hardware.

The consumer electronics giant said on Tuesday that CEO Steve Jobs will return to the stage at its World Wide Developer conference next Monday to present Mac OS 10.7 Lion for computers and the iOS 5 for the iPhone.

The software is the first major upgrade to the iOS platform since the iPhone 4 was introduced. Couple this with the iCloud, the hosted service that Apple is also expected to roll out and you'll have a drastically upgraded product, analysts contend.

JMP Analyst Alex Gauna told clients that software advancements with iOS 5 and iCloud could be much more revolutionary than a fifth-generation iPhone, while also setting low expectations for new hardware at WWDC.

We will be looking to measure whether the advances are enhancements to consumer-centric offerings such as iTunes and MobileMe, or virtualization breakthroughs that pave the way for more significant enterprise, social networking, and/or multimedia inroads, Gauna wrote.

Shaw Wu at Sterne Agee went further to even say the next iPhone would only feature minor upgrades, saying he has been told that Apple will have a more radical iPhone refresh in 2012, when the company is expected to introduce a model with support for high-speed 4G long-term evolution data.

The backbone of the new platform will be the iCloud that will give users access to data and services streamed directly from Apple servers.

Apple has already embarked on what could be the largest data center in the world in Maiden, North Carolina in recent months. The half a million square feet center will give Apple massive computing to accomplish a number of things not possible before.

RBC's Mike Abramsky said that iCloud would let Apple exploit licensing and digital rights management, consumer friendliness, and a massive existing install base of more than 200 million iOS devices, plus iTunes users.

Apple's licensing relationships and 'controlled' platform may appeal to studios/publishers seeking to minimize piracy, while protecting their economics in a hosted model, Abramsky wrote in a note to investors on Wednesday. iCloud may also be differentiated via Apple's trademark user experience for convenience, simplicity, and discoverability. iCloud APIs may in time extend to developers.

The half a million square feet center will also give Apple massive computing power that users can also exploit and benefit from, like streaming music and video and a digital locker service.

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