Apple-centric blog MacRumors posted images of what appears to be Apple’s next iPhone. Although they remain unverified, if they are legitimate, Apple shareholders should be concerned.
The images show a phone identical in size and shape to the iPhone 5. And, despite whatever other features Apple plans to implement, such a phone could fall far short of sales expectations.
The iPhone’s screen
In recent months, Apple has received a great deal of criticism for its decision to go with a 4-inch screen on the iPhone 5. With the success of phones running Google’s Android operating system like the Galaxy SIII, Galaxy SIV, HTC One, Droid DNA, Nexus 4, and Xperia Z (among others), 4.5-5-inches has become the new standard in terms of flagship phone screen sizes.
While these larger phones may be somewhat awkward in terms of one-handed operation, the larger screen lends itself better to using apps, browsing the Internet and watching video -- increasingly popular functions, especially given the rise of high-speed, 4G networks.
On numerous occasions, such as Apple’s last earnings call, CEO Tim Cook has been asked to defend the iPhone 5’s screen. In response, Cook has argued that other factors are more important than size, like energy efficiency and color quality.
Cook has never explicitly ruled out a larger iPhone, which is likely why some analysts have continued to argue that a bigger phone is just around the corner.
But if the MacRumors’ images are real, a bigger iPhone might not appear until 2014. Of course, that wouldn't be too surprising, given that the Cupertino tech giant stuck with the same body for the iPhone 4 and 4S.
Samsung’s disappointing S4 sales
As I've written in the past, Apple is more or less an iPhone company. Although it makes numerous other products, the vast majority of the company’s revenue and profit comes from the iPhone.
Apple’s biggest competitor, Samsung (NASDAQOTH: SSNLF), saw its shares plummet earlier in June after an analyst said that its latest flagship phone, the Galaxy SIV, was seeing declining demand. While the SIV had a solid launch, demand looked to be falling off.
Tech reviewers have slighted the SIV on the grounds that it isn't a major upgrade compared to Samsung’s prior handset, the SIII. If the SIV is hardly better than the SIII, one would expect sluggish sales, given that the smartphone market might be nearing saturation.
Likewise, if Apple’s next iPhone is simply an iPhone 5S, investors shouldn't expect record demand. A larger iPhone might have prompted a massive upgrade cycle, wherein existing iPhone users -- jealous of their friends’ larger Androids -- would have been eager to pay up.
Could a thumb scanner help?
Although the iPhone 4S had the same body as the iPhone 4, it did come with one major software update -- Apple’s virtual personal assistant, Siri.
This time, Apple might be going for something similar. After purchasing AuthenTec last year, there has been much speculation that Apple would implement a thumb scanner into the home button on its next iPhone.
Could the iPhone 5S come with a thumb scanner? It’s what Topeka Capital’s Brian White believes.
But would that be enough to sell the handset? Siri was a great marketing ploy -- Apple was able to create TV ads centered around the application. A thumb scanner seems like a harder sell.
The iPhone 5S could replace your wallet
The true potential of such an innovation would be if Apple were to tie it to a system of mobile payments. If the iPhone 5S was unique in being the first iPhone to fully replaced your wallet, that might sell well.
Both Morgan Stanley analyst Katy Huberty and Piper Jaffray analyst Gene Munster have said they believe mobile payments are in Apple’s future.
However, Google has been trying to pull off a similar feat for years. Despite the fact that most Android-phone makers have equipped their phones with NFC technology, Google’s application -- Google Wallet -- has thus far failed to gain much traction since its release nearly two years ago.
In fact, Businessweek labeled it a “money pit,” noting that Google had invested hundreds of millions of dollars and has thus far seen little return.
The next iPhone
At this point, only Apple knows the dimensions of its next iPhone. But if the images MacRumors posted are legitimate, shareholders should be concerned. Continuing to cling to a smaller form factor could lead to sluggish sales.
Giving the next phone a thumb scanner, and tying it to a system of mobile payments could help, but as Google’s struggles demonstrate, that’s no guarantee of success.