It’s become a familiar story: Apple reveals a new product or OS, and Apple shares fall… Despite the fact that iOS 7 was unveiled to largely positive reviews, Apple shares have sunk 3.57% to $432 from Monday’s high of $448. What’s Apple to do? Why, change the iPhone screen size, of course!
Apple is reportedly looking at tinkering with iPhones with larger screens to keep pace with rival Samsung, according to sources who spoke with Reuters. Specifically, Apple has approached its suppliers with plans for a 4.7-inch screen iPhone and a 5.7-inch screen iPhone, both of which will be introduced next year.
That’s a huge departure from Apple’s tried-and-true 3.5-inch screens, which Steve Jobs once said were the “perfect size for consumers.” Apple made the bold leap to a 4-inch screen with the iPhone 5, but that’s still dwarfed by Samsung’s Galaxy S4 and Galaxy Note 2, which have 5-inch and 5.5-inch screens, respectively.
While Samsung’s global smartphone market share has been growing, increasing to 30.8% in Q1 2013 from 27.6% in Q1 2012, Apple was the only company among the top five smartphone makers to lose market share, falling to 18.2% in Q1 2013 from 22.5% in Q1 2012.
Will the growing popularity of “phablets” push Apple to experiment with different sizes?
“Apple has a number of different opportunities to introduce products that can return it to EPS in 2014 and this is one of them,” said BTIG analyst Walter Piecyk in an email. Piecyk has projected that Apple will have a miserable June quarter but will end the year on a high note with a low-end iPhone and a mystery device that will generate an additional $5 million in revenue.
Apple has not responded to email inquiries from VatorNews. The Reuters report also notes that sources say Apple is looking at possibly offering its cheaper iPhone in a variety of different colors.
The company has repeatedly disappointed shareholders since Steve Jobs’ death in late 2011. For the first time since 2003, Apple reported a profit decline in April. Net profit came in at $9.5 billion, or $10.09 per share, which is down from $11.6 billion or $12.30 per share in the same quarter last year. Additionally, gross margins came in at 37.5%, down from 47.4% in the same quarter last year. Consensus pegged gross margins at 38.5%.
Many analysts are forecasting doom and gloom for the first half of the year for Apple. Notably, back in April, Piper Jaffray’s Gene Munster cut his price target to $688 from $788, citing concerns that Apple’s rumored cheap iPhone will cannibalize its higher end phones.
Specifically, Munster theorized in his report that for every three cheap iPhones sold (which he believes will sell for $300 sans contract), it will translate to one less higher priced iPhone sold. He believes Apple will sell 75 million cheap iPhones, which will account for 11% of the low-end market.
But other analysts argue that Apple needs a low-end iPhone to grow its customer base in emerging markets like China and India. China’s smartphone market is projected to grow 48% this year, while the rest of the global smartphone market is expected to grow 31%. At the end of 2012, there were 160 million active Android users, compared to 85 million iOS users. But activations are growing at a quick clip. In January 2012, there were just 9.2 million Android and iOS activations, but by the end of the year, that number ballooned to a whopping 133 million activations per month.
Image source: iphonesavior.com