Apple shares have been plummeting, but analysts expect that an iPhone 5S and an iPhone with a bigger screen to take on the 'phablet' market could help the company recover.
In a research note sent out on Monday, Morgan Stanley's Katy Huberty highlighted that March 2012 saw Apple's quarterly stock performance and gross margin peak. But the cost of the launch of the iPhone 5, which included capital equipment investments and higher NAND flash prices, saw margins fall throughout the rest of the year, bringing stock performance with it.
This year, however, Huberty expects Apple to launch an 'iPhone 5S' with minor changes, as it has done traditionally with the iPhone 4S and iPhone 3GS. This will mean that Apple won't be required to splash out on redesign necessities as it did with the iPhone 5, therefore allowing the gross margins to increase. SEE: iPhone 6 release date, rumours and leaked images
Huberty also thinks that Apple will be able to make better deals on NAND components for its future devices, and the launch of the 128GB iPad could be evidence to support this theory, reports Apple Insider.
In her note, Huberty points to Apple's 10-Q filing, which shows that the company's purchase commitments this quarter are $904 million, compared to the $4.5 billion spent by the company two quarters ago when it was investing in the iPhone 5's new in-cell displays.
Morgan Stanley forecasts that Apple will see gross margins of 38.7 per cent in the company's fiscal year 2013, and Apple itself projects a gross margin that falls short of its peak of 43.9 per cent in 2012.
Meanwhile, Barclays Capital's Ben Reitzes has said that Apple needs to launch an 'iPhablet', because he expects the larger phone market to dominate smartphone shipment growth into 2015.
Reitzes says that the one-handed use of the iPhone 5 will be "less important since phone calls are becoming less important than navigation, texting, videos, books and web access for many."
"The larger screen seems to be more popular outside of the US and the phablet has significant momentum in China," the analyst added.
Rietzes expects that Apple will launch an iPhone 5S towards the middle of 2013, as well as a low-cost iPhone for emerging markets. The rumoured larger iPhone, dubbed iPhone math (likely a mistranslation from iPhone plus), won't arrive until the last quarter of the year or the beginning of 2014, he said.
The bigger iPhone will need to have near field communication (NFC), advanced imaging features and improvements in navigation in order to be competitive, but "the most important advances for the iPhone in 2013 will actually be improvements to iOS and its services, which can expand the market for Apple," added Rietzes.
"We believe Apple can turn perceptions around with a real move into payments, an integrated iOS-led television service and improvements to iCloud (including subscription based services)," he concluded.
Of course, the a bigger iPhone would likely mean that Apple will need to invest in new equipment ahead of the launch, which would contradict with Huberty's theory that Apple's gross margins will see an increase due to low redesign costs.
Do you think Apple should launch a bigger iPhone to compete in the 'phablet' market against the likes of Samsung's Galaxy Note? Let us know in the comments section below, or on Twitter.
See also:
More AAPL stock manipulation? 800,000 shares dumped in last second of trading
iPhone 6 rumour rollup for the week ending 1 February
Apple's iPad mini 2 to have 324ppi Retina display, topping iPad 4 - report
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Comments received
ormiston said on Tue, 05 Feb 2013
In a moment of insanity, I bought the Blackberry Z10 as I had gotten bored with the iPhone 5 and, especially the iOS. In the hand, the Z10 felt really nice, just the right size and weight but it was let down heavily by a less than good experience with the BB10 OS. So, it went back and I went back to my iPhone 5. Why am I bored with the iOS 6 & iPhone? Well, the iPhone is too small now and not very good at keeping or getting a signal. At the end of the day it's a phone. The iOS needs a radical overhaul and rethink. Why no true multi tasking with apps running in the backgrounds but more to the point, it's too small a phone now for the things we do.
ari-boy said on Tue, 05 Feb 2013
I totally disagree with the comments above that the iPhone is too small for the things we do - and there is Apple's problem: different people want different things. I remember well those horrible Nokia 'brick-like' phones a few years before the original iPhone appeared that were just awkward to put in your pocket and any phone that can't be used by just one hand is too big IMHO.
I was sceptical of the need for an iPad Mini, but was suitably impressed when I got one in my hand(s) - so i may agin be proved wrong, but the point of phone (for me at least) is to have something highly portable and can be easily used if you're carrying something else in your other hand. Whatever next – a stylus?!!
Dragonfly said on Wed, 06 Feb 2013
I think a bigger iPhone should be called an iPhad. Really phones don't get better as they get bigger, you need to come up with the most useable optimal size for most hand sizes and stick with it. That may or may not be bigger than pre iPhone 5 sizes, but at some point there will be general consensus that this is as big as a phone should get, and anything bigger is a different type of device for a niche market. (an iPhad).
Multiple resolutions fragments the app market for developers and it's exactly what the competition would want Apple to do.
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