Today: Apple (AAPL) shares drop more than 2 percent as investors worry low-cost iPhone 5C could undercut sales while they wait for a new 'wow' product. Also: Dow drops HP, Netflix completes its comeback.
The lead: Apple unveils two colorful new iPhones, but is it enough?
Perhaps the most surprising thing about Apple's iPhone announcement Tuesday was the lack of surprises, and Wall Street responded with a lack of enthusiasm.
As has been widely speculated, the Cupertino tech giant unveiled two new smartphones, the iPhone 5C -- a cheaper model with a plastic shell and coming in multiple bright colors -- and the iPhone 5S, its new flagship model featuring a faster processor, a gold-colored version and fingerprint sensor for extra security. Both versions will run on the new iOS 7 and feature high-def Retina screens.
Apple also announced a partnership with NTT Docomo, Japan's largest mobile carrier. A similar deal with China Mobile, the world's biggest mobile carrier, is expected to be announced at an Apple media event in Beijing on Wednesday.
There had been speculation that Apple might unveil a new "wow" gadget, such as the long-rumored iTV or iWatch, ar at least a revamped Mac or iPad. Though it's the world's most valuable company, some analysts have said that with smartphone sales flattening, Apple desperately needs another innovative, game-changing device to stay on top.
The lack of such a groundbreaking gadget Tuesday sent Apple shares down $11.53, or 2.28 percent, to close at $494.64. Predictability was not investors' only concern: Some experts worry the iPhone 5C, which will start at just $99 for a two-year contract, will undercut Apple's own products. Apple is "walking a tightrope between growth and profitability," Forrester Research analyst Sarah Rotman Epps told Bloomberg News. Others worry that the two new devices and their various colors will complicate buying for consumers and hamper Apple's production. "This increases their complexity a lot," Mike Fawkes, an ex-supply chain executive at Hewlett-Packard (HPQ), told Bloomberg.
Even the Asian expansion is not without risk. Apple is being soundly beaten by lower-cost Android phones in China, and hopes the iPhone 5C can help regain market share. But many foreign carriers sell phones at full price without a contract; that would place the 5C at $550, just $100 less than the 5S, and still $200 to $300 more than many of its Android rivals, making the 5C much less attractive to potential consumers.
Some analysts, though, are content to take a wait-and-see approach. "We need to let Apple go after their market share and then bring in innovation for the next wave," Laurence Isaac Balter, chief market strategist for Oracle (ORCL) Investment Research, told the New York Times. Balter said he sees the 5C as a stopgap measure to cut Apple's losses, buying it time to focus on that next "wow" product.
Uncertainty over Apple's future is likely to linger. Much will ride on details from tomorrow's Apple announcement, which will also include media events in Tokyo and Berlin, and another product announcement that is expected in October.
Dow drops Hewlett-Packard; Netflix's comback is complete
Hewlett-Packard was dumped from the Dow Jones industrial average Tuesday, in that index's biggest shakeup in a decade. The 30-company index, which consists of stocks widely considered to represent the world economy, also dropped Bank of America and Alcoa. The three were the Dow's lowest-priced stocks. Nike, Goldman Sachs and Foster City-based Visa were added to the index.
The move, which takes effect Sept. 23, ends HP's 16-year inclusion in the Dow. Ironically, HP has been among the best-performing Dow components this year. The reason for that, though, is the same reason why HP was dropped -- the Palo Alto computer giant has taken a huge tumble in recent years, falling from a high of nearly $54 a share in 2010 to a low of $11.35 last fall. While HP's stock price has gradually improved -- closing at $22.27 Tuesday, down 0.4 percent -- through CEO Meg Whitman's efforts to turn the company around, it was a case of too little, too late.
"HP remains confident that we are making progress in our turnaround," the company said in a statement Tuesday. "We are already seeing significant improvement in our operations."
Google (GOOG) and Apple were among the companies considered to join the Dow, Reuters reported, but were passed over because of their high stock prices. The Dow, unlike most other indexes, bases inclusion on stock price rather than market value.
Visa has benefitted in recent years from new payment technology, and has seen its stock soar. Visa is up 17.8 percent this year, and closed Tuesday up $6.04, or 3.38 percent, to $184.59.
Elsewhere in Silicon Valley, shares in Mountain View-based streaming-video company Netflix (NFLX) hit a new high, closing at $313.06, up 6.43 percent on the day. Netflix shares have tripled in value this year, erasing huge losses that occurred in 2011 with the ill-fated -- and short-lived -- rollout of Quikster. This week's gains have been spurred by a deal in the U.K. for Netflix to offer streaming of Virgin Media cable shows. It's the first time Netflix has teamed up with a cable network, and potentially opens up lucrative new revenue streams. Palo Alto electric car maker Tesla Motors (TSLA) made up for Monday's slide with a 3.52 percent gain Tuesday, after Tesla announced the expansion of its Supercharger network in Europe. Tesla closed up $5.66, to $166.36.
Down: Apple, HP, Facebook, Zynga
The SV150 index of Silicon Valley's largest tech companies: Up 0.02, or 0 percent, to 1,334.06
The tech-heavy Nasdaq composite index: Up 22.84 , or 0.62 percent, to 3,729.02.
The blue chip Dow Jones industrial average: Up 127.94 or 0.85 percent, to 15,191,06.
And the widely watched Standard & Poor's 500 index: Up 12.28, or 0.73 percent, to 1,683.99.
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Follow Mike Murphy on Twitter at @mmmmurf.