Apple unveils radio amid iOS revamp to spur demand

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Apple CEO Tim Cook walks on stage to deliver the keynote address of the Apple Worldwide Developers Conference, on June 10, 2013, in San Francisco.

Apple Inc. (AAPL) introduced a new music-streaming service along with sweeping changes to the software powering iPhones and iPads, seeking to blunt the advance of Google Inc. (GOOG)'s Android mobile operating system.

ITunes Radio features more than 200 free stations, supported by advertising for some users, Apple said. The Web-music service is part of iOS 7, an overhaul of the mobile operating system with a simpler user interface with more translucent design elements.

With smartphones sharing many physical traits and technological features, device makers are relying more on software design and services to gain an edge and lure consumers. While iTunes Radio is aimed at boosting the appeal of iOS 7, it may not be enough to draw users away from established offerings by Pandora Media Inc. (P) and Spotify Ltd.

"ITunes Radio as a Pandora clone is a lot less disruptive than a Spotify clone would have been," Jan Dawson, an analyst at Ovum in London, wrote in a research note. "This is a nice free feature that lots of people will probably try out, but existing Pandora users won't have much reason to switch."

Shares of Apple, based in Cupertino, California, fell less than 1 percent to $438.89 at the close in New York. Pandora, based in Oakland, California, rose 2.5 percent to $15.49.

Software revamp

Apple shares have declined 37 percent before today from a record in September, a month before Apple's last major product announcement. The period since the debut of the iPad mini is the longest product drought for Apple in at least a decade.

IOS accounted for 18 percent of global smartphone shipments in the first quarter, while those running Android made up 74 percent, according to Gartner Inc. IPhone sales climbed about 16 percent in the first quarter, lagging the smartphone market, which grew 43 percent.


"Apple has been in a funk, and this is an important event to highlight how they are innovating," said Ben Reitzes, an analyst at Barclays Plc in New York.

Changes to the software behind the devices that generate more than 70 percent of Apple's sales has been in the works since Cook shuffled his lieutenants, putting head industrial designer Jonathan Ive in charge of the look and feel of Apple's software. A longtime confidant of co-founder Steve Jobs and the draftsman behind the iPhone and Mac, Ive has been leading the revamp of IOS. The new version also redesigns often-used applications such as e-mail, calendar and text messaging.

"IOS 7 is the biggest change to iOS since the introduction of iPhone," Cook said at Apple's 24th annual developers conference in San Francisco today.

Mac updates

Apple also introduced a new version of its Mac operating system called Mavericks, aimed at delivering tighter integration with iPhones and iPads.

The software lets users' appointments, password, map directions and other information follow them between devices, Craig Federighi, Apple's software chief, said at the conference.

Mavericks is designed to run on less energy than prior versions, conserving battery life, and also includes features for using multiple screens, Federighi said.

MacBook Air, Apple's lightweight laptop, was updated with new processors and memory, enabling faster operation and longer batter life. Apple also unveiled a new Mac Pro desktop computer, with advanced power and memory features for high-end users. The high-end computer will be assembled in the U.S., Cook said, part of Cook's plan to shift some of its manufacturing to the U.S.

Software developers

Apple (AAPL) has traditionally previewed new iOS software at the conference and then released it to the public when a new iPhone is introduced later in the year. As Google, Microsoft Corp. (MSFT) and Blackberry (BBRY) try to lure engineers to build for their systems, Apple is trying to maintain the loyalty of those who create games and applications.

Cook last month said the company would be giving developers more opportunities to add features that can be integrated into Apple's operating systems.

In addition to developers, Apple also needs to add software and services to convince customers, along with wireless carriers that subsidize the iPhone, that the device's ecosystem is still worth a premium compared with the cost of rival devices, according to Barclays's Reitzes.

After Cook appointed Ive to rethink the mobile operating system, engineers raced to finish the software on time for today's event. Ive, along with Federighi, took over the duties of former mobile-software chief Scott Forstall, a key presenter at past Apple events who left the company as part of Cook's management shake-up.

"This major effort is only possible because of the incredible collaboration between Jony and his design team, and Craig and his incredible engineering team," Cook said.

While Apple created the market for mobile touch-screen devices, the company hadn't made any radical changes to the software running those gadgets since Jobs first pulled the iPhone out of his pocket in 2007.

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