Business Technology

Tuesday 16 September 2014

Apple stock surges ahead of bigger, better iPhone 6

Published 24/08/2014 | 02:30

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Apple Inc
Apple Inc

Apple is back. In stock market terms, it has returned to the levels of its historic highs. Last week, the tech giant's share price surged back to a €450bn market capitalisation - the loftiest valuation it has had since its 2012 high point.

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Is this over-exuberance? Or is it based on something solid? On the face of it, it's because of the iPhone 6. It has all but been confirmed that Apple will announce at least one new large-screen iPhone in September.

The move, which is long overdue, has buoyed analysts' sentiments about Apple. For once, everyone is happy. For once, there will be very little to whinge about.

The analysts and market speculators are right to be boosting the company at this time: the iPhone 6 is going to be a smash hit. This correspondent has often been lukewarm about some iPhone upgrades, with (arguably) very incremental updates implemented over the last three years. But everything we know about the iPhone 6 indicates it is set to be a juggernaut, putting Apple back in control of the high-end phone market.

To recap what the iPhone 6 is likely to offer, most of it revolves around that larger screen. Two variants have been reported, a 4.7-inch model and a 'phablet' sized 5.5-inch model. According to reputable sources (such as the Wall Street Journal) with a track record of accurately predicting iPhone upgrades, the phone will also have tougher, anti-shatter glass, a better camera and way more storage capacity. All of these features will please most business and consumer users.

But it is the bigger screen that will bring Apple ahead in leaps and bounds compared to its existing offerings. Why? Because most people want bigger phones, whether they know it or not.

For three years, Apple strongly resisted this. The late, great Steve Jobs suggested that phones above the then iPhone's size wouldn't be accepted by ordinary people. Apple has stuck to this position every since, despite a slight bump up between the iPhone 4 and 5.

But that stance now looks outdated. And a 4.7-inch phone is far, far larger than a 3.5-inch iPhone 4 or 4-inch iPhone 5.

In Ireland, the bulk of the phone market is conservative. It takes a few years to fully react to modern trends. Irish corporate users, for example, stuck with BlackBerrys for three years after the ecosystem ran out of ideas. Now, the Irish business community has largely migrated to iPhones, which have also become the default mobile device for older people.

These core Apple demographics have become notoriously cranky at dealing with changes in form factor and features. ("Why can't they just leave them the way they were?")

But I have yet to hear someone who switched from a smaller smartphone to a larger one complain about it. In fact, the more common comment is that the user finds it hard to understand how they ever used "such a small" handset before.

As Samsung, Sony and even Nokia have discovered, larger screens encourage users to do much more with their devices. Netflix, for example, is an absurdity on a 3.5-inch iPhone 4S. But it is genuinely do-able on Samsung's 5.7-inch Galaxy Note phone.

The move to a larger iPhone screen for Apple is not without its downsides. In particular, it looks set to threaten some sections of the iPad market. A little-reported development in the technology hardware industry is that tablet sales are stagnating badly.

In fact, in Apple's most recent financial accounts, it admits to selling less iPads this year than last year. Several reasons have been advanced for this, but the biggest factor is the growth in sales of large-screen phones. Put simply, if you have a 5-inch phone, you are much less likely to turn to a tablet for casual web browsing or email than if you have a 3.5-inch iPhone.

Apple, with the biggest and most profitable tablet business, knows this. Whether or not this has been a factor in its tardiness to introduce a larger iPhone is anyone's guess. But there is little question that a 5-inch iPhone will put a dent in the market for the iPad mini.

This puts the introduction of the larger phone into context: Apple is showing that it is willing to eat part of its own lunch to stay at the top of its most main market.

Apple is also preparing alternative uses for the iPad, especially for business users who largely do not use the device for anything other email and light office tasks.

There are other things that Apple is said to be launching in September, with whispers of a new mobile payments system that could boost an under-performing part of the technology industry.

But it is the iPhone 6 that is already making billions for Apple's investors.

Sunday Indo Business

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