Apple held their annual fall event today, and the general reaction seems to be disappointment. Since we didn't get the normal summer iPhone refresh, many people thought there was a big redesign or other home run in the cards. Instead we got mostly software updates, many of which were already announced at WWDC in June. I have to admit I was a bit underwhelmed at first. I'm long overdue for a phone update (iPhone 2g ftw!) and was hoping for something major. New hardware design is what captures the headlines and gets all the oohs and ahs. But when I think about it, the software is equally if not more important, despite getting less attention.

I'm pretty sure that the iPhone 4S has been ready to go for quite a while, and they were just waiting on the software. We got a hint of this at WWDC when iOS 5 was announced as a fall release. Why release new hardware if the software isn't ready yet? And why mess with the hardware design of the best-selling smartphone? Remember the 3rd generation iPod shuffle? That's an example of messing with something that's already working. I feel like there are limited improvements to be made on the iPhone 4 hardware design. People were talking bigger screen, thinner, lighter. I could see the screen going slightly bigger, but I can't see a reason for trying to make the thing any thinner. There is however still a lot of potential for software improvement, so Apple did the logical thing - stick with the same design and focus on improving the software, much like the 3g → 3gs which turned out just fine. Even if the software improvements are not necessarily groundbreaking, if they add some value, however small, it's the smart thing to do. None of the iOS 5 features blow me away, but it makes everything just a little nicer and easier than before. iCloud and wireless sync will add a lot of convenience, and Siri is looking like a nice acquisition. Apple really got the touch interface right, and now they're taking a shot at a voice interface which has very big potential.

As always, I like to look at this from a business perspective. Apple didn't blow anyone away today on the surface, but initial reaction doesn't seem to impact sales. The iPad also had a muted response initially, and we all saw how that turned out. The new software features are good enough to keep iPhone in the lead, and the smartphone market is still growing rapidly. Since the form factor didn't change, I imagine the manufacturing process should be easier and allow demand to be met. I also think making the 3gs free (with contract) is a big deal. That has to be the best value for people on the fence for a smartphone, and I imagine they will move a lot of those.

I think the movement of the stock price today tells the story well. There was initial disappointment when the event ended with no big surprises, and the stock plunged 5% right on the 200 day moving average. But then when you think about how sales will actually be affected, you get some recovery. The earnings report is coming up soon, and Apple consistently crushes earnings. I got lucky and bottom picked some shares @ 354.90 today. Still watching that 360 support area.