Will The iPhone 6 (And The iWatch) Be A Success?

| About: Apple Inc. (AAPL)


Two new Apple on the tree, Analysts are already making projections for Apple based on iPhone 6 and iWatch.

Apple's iPhone growth has been steadily increasing since its introduction in 2007.

Android's rapid growth didn't affect Apple's growth. Surveys showed high anticipation for purchasing the upcoming iPhone 6 and iwatch.

Projections are based on what is expected as no specs have been released officially.

Will The iPhone 6 (And The iWatch) Be A Success for Apple ?

Most probably. That's the answer you need if you're pressed for time. Read below for the scenic route.

Greatest show on earth

The late Steve Jobs knew marketing. He could launch a product. In fact, on his watch, specially in his second act as Apple boss, he turned it into prime entertainment. Apple [AAPL] isn't about to let go of that. An Apple product launch is that one thing that doesn't need for the company to sink money into for buzz, though it does anyway.

As long as it isn't a horrible product - which Apple doesn't make - it'll be a success. Even if it were to completely replicate the iPhone 5S and merely install a faster processor, the iPhone 6 would sell like hot cakes. The whole eco-system of app developers would set into motion products that would run on 5S for now but would need 6 for further updates.

What is the iPhone 6 going to be like?

We won't know for sure till the product launches. But, if the past is anything to go by, we know that, as opposed to the slightly incremental changes that go into the "S" models, there are key feature changes in newer models. There's usually a changed form factor, the sort that we saw in the iPhone 4 and iPhone 5. What would we see here?

It'll be bigger

If rumours are to be believed, we're expecting a larger screen size. This is, of course, logical. The size of the screen grew from 3.5 inches to 4 inches with the iPhone 5; an increase for iPhone 6 is but expected.

The well-informed money is on two options: 4.7 inches and 5.5 inches; the first is going to come out at the time of the launch and the second, sometime later this year. If that were to happen, and there are chances that it might, it would be taking away that one solid advantage the adamant users of some of the Android-powered phones keep harping on about.

Since much before the rumours about the 6 launch, Apple's leaked internal memos had pointed at the need to develop larger screens.

….and not just the screen; check under the hood as well

The iPhone 6 is also widely expected to be running the all-too-powerful A8 processor as well.

Adding a bigger engine has become pretty much a given in the game. Asking what the users would do with a processor this fast, given the power of the A7 is to risk sounding like Bill Gate's (maybe misquoted prediction about "640k (of memory) being enough for everybody."

A phablet? Ka-ching!

The 5.5 inches model would definitely qualify as a phablet. And it just makes sense for Apple to finally get in on the game.

Phablets are the new engines of growth for the entire sector. Sales of smartphones with screensizes larger than 5 inches grew by a whopping 369% over 2013. As for their share in the overall smartphone market is concerned, they contributed to a full third of all sales in the first quarter of 2014. By 2018, there are to be an estimated one billion phablet users in the world.

What's more, though the share of the phablets might be an impressive one-third of the smartphone market, their share of the market for smartphones selling more than $500 was 47%.

Threats? Well, yes, some…

The smartphone landscape has changed a lot since the iPhone started. Hell, it has changed a lot since the 4S came out. Because, in addition to the usual gang of rivals, Microsoft(NASDAQ:MSFT), after acquiring Nokia's(NYSE:NOK) phone division, has become a serious competitor.

Its top-of-the-line product within the smartphone category, the Lumia 1020, and, in the phablet category, the Lumia 1520, have proved to be worthy adversaries to the iPhone 5S. In fact, in certain parametres, like camera power, there is no way Apple can catch up.

Then there are the older adversaries. More specifically, the formidable Samsung(OTC:SSNLF). It is charging on in the US market despite setbacks in the copyright litigation with Apple. And its salesmen have one hell of a talking point: Apple itself procures key components from Samsung.

Then there is the prickly issue of the iPhone 6's price. There are rumours that the already expensive iPhone might be gunning for an increase of a full $100 for the 5.5 inch model. It remains to be seen whether an increasingly competitive market still has customers who will snap up iPhones at those price points.

And now, a bit about the enigma that is the iWatch

Whereas the iPhone 6 has it in it to be a successful product, the iWatch might come in the game changer category.

Does the statement above seem hyperbolic? Well, consider this: back in 2007, when the iPhone first came out, no one would have predicted the extent to which it would change the sector. Yes, there were smartphones before it, but they weren't any smart. And even if you're a die-hard Android crusader, you would have to begrudgingly admit that the iPhone really led the way for others to follow.

Then there was the iPad. Apple singlehandedly created the tablet market, with many others jumping into the fray.

The problem with the discussion above (about iPhone 6) was that since Apple jealously guards its upcoming products' details, much of it was based on (well-informed) rumours. With the iWatch, consider that problem, and multiply it by a thousand. You see, with the iPhone 6, at least there is a frame of reference. If you know there it is going to be a 5.5 inch phone, you would know it is a phablet and look at the global market for phablets. Sort of like a Sudoku puzzle of consumer economics. In the iWatch's case, there is nothing to compare it with. It will blaze a trail of its own. Create a market where there was none.

You can't ascertain its market by looking at what Swatch (or Rolex) are doing or how much they are selling. That would be like, in 2007, looking at the iPhone and compare it to Nokia's phones (which were unsuccessful and the company is around, of sorts, only because Microsoft wanted in).

What we do know is that Apple is going to roll out the iWatch sometime later this year, by the end of the third quarter.

How to assess the market is anyone's guess but some analysts are predicting iWatch revenues to the tune of $17.5 billion.

Then there are the other markets that it is expected to create. For instance, the health applications. Again, to attempt to gauge Apple's cut by basing it on the size of the current health monitoring market would be foolish.

What about the shareholders?

A good time to buy, actually. Expect a spike in AAPL stocks, currently trading for a little over $92, till the product launch takes place. Expect a slight plunge later. But those considerations are for the day traders. For those in for the long haul, the company remains a good bet.

Apple is a viable company with a stable revenue source. Its stock price is inching back to its September 2012 high point of a little over a hundred dollars a share (it is currently trading at $93.67) and it has never seen a sharp plunge.

There's none of the ooh-shiny immaturity (looking at you, Linked In) with the stock either: at a P/E ratio of 15.67, your retired high school chemistry teacher would feel comfortable with AAPL.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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