As per news agency Bloomberg, Apple Inc. (AAPL) is expected to ship the latest version of iPhone on October 4, 2011. Apple has planned an event in San Francisco where the Cupertino, California-based company will officially unveil the much-hyped device.
Apple introduced iPhone way back in 2007 and released its fourth version at the Worldwide Developers Conference (WWDC) in June 2010. The new model will be launched 16 months after the launch of iPhone 4, compared with 12 months between previous model updates.
According to Bloomberg, the device tentatively named iPhone 5 will feature a better camera and faster processor. iPhone 5 will run on Apple’s upgraded iOS 5, which includes new notification and text messaging systems. According to analysts, the new iPhone may include voice-recognition software, faster networking technology and improved graphics performance.
iPhone 5 is expected to be slimmer and lighter compared to the earlier versions. Analysts believe that Apple will maintain its pricing policy for the upcoming iPhone and will likely drop the price of iPhone 4 to give customers a more affordable alternative.
The iPhone product line is Apple’s most successful to date, with 55.2 million units sold in the nine months ended June 2011, representing an increase of 113.0% from the year-earlier period. Net sales of the iPhone and related products and services were $36.1 billion in the nine months of 2011, representing a year-over-year increase of 121% and accounting for 45.1% of Apple’s total net sales.
Analysts believe that the long gap between iPhone 4 and 5 will drive demand, which in turn will boost sales for the upcoming first quarter of 2012, which ends December 2011. RBC Capital Markets estimates 110 million iPhone sales in 2012, that too at a much faster pace than 2011.
Moreover, the addition of Sprint Nextel Corp. (S), the third-largest carrier in the U.S. that will begin offering iPhone with an unlimited data services plan will also boost sales, according to the analysts. Currently, AT&T Corp. (T) and Verizon Wireless are the only two U.S. carriers of the iPhone.
We also note that this will be the first major product to be introduced under the supervision of the new Chief Executive Officer (CEO), Mr. Tim Cook, after Apple’s iconic CEO Mr. Steve Jobs resigned on August 24, 2011. An increasing competitive landscape, where Apple is facing tremendous competition from Google Inc.’s (GOOG) android-based smartphones makes the situation tricky for Mr. Cook and his new management team.
It will be interesting to see how Mr. Cook responds to these headwinds and also to the growing demands of the industry, as he steps into the shoes of Mr. Jobs, who has been synonymous to new ideas that develop into new products that Apple thrives on.
Our Take
We believe Apple has immense potential to gain significant market share in the smartphone market, with the launch of the new iPhone. Apple has already established itself as the leading smartphone maker in the second quarter of 2011. Research firm, Strategy Analytics, confirmed Apple’s iPhones to have grabbed an estimated 18.5% market share, compared with the 13.5% share a year earlier.
We also believe that the acquisition of the Nortel assets and approximately 40 patents in China bodes well for Apple going forward. We are appreciative of Apple’s approach of acquiring patents, which will lead to incremental growth in China as well as in other emerging economies in the Asia-Pacific over the long term. Apple’s ability to spur the popularity of the products in developing nations, where pricing is often an important consideration, will go a long way toward deciding the company’s future growth.
However, increasing competition and various lawsuits keeps us on the sidelines. We maintain a Neutral rating on a long term basis (6-12 months). Currently, Apple has a Zacks #2 Rank, which implies a Buy rating in the short term.
