Small sensors are getting better. I am shocked at how good the image quality is on my RX100 (with a "one inch" sensor; one inch refers to the size of vacuum tube that would contain such a sensor if it were 1960 or something, no dimension is anywhere near one inch). I'm not going to give up 4x5 for it, but it's way better than a phone.
That said, the camera bump is ugly. Why can't they use a telephoto design (your 500mm SLR lens isn't 500mm long, remember).