Low-cost “iPhone M” expected to outsell iPhone 5S next year

An UBS analyst said in a note to investors that the upcoming low-cost iPhone will outsell the new flagship iOS smartphone next-year, although it may not be as profitable for the company as its more expensive brother. Interestingly, the device is expected to launch this quarter.
Analyzing Apple’s future, Steve Milunovich looked at the company’s various mobile products including the iPhone, iPad and iPod, reiterating a “Buy” ratting for Apple stock with a price target of $500.
However, Milunovich cut estimates for next year, saying that the iPad and “iPhone M” may have a negative effect on Apple’s profits. Milunovich expects for Apple’s fiscal year 2014 a $179.9 billion and $42.29 per share net profit, and a gross margin of 36.6%, down from $185.1 billion and $43.36 per share.
Milunovich refers to the low-cost iPhone as the “iPhone M” – various reports seem to believe that the phone will be sold as the iPhone 5C – while the high-end seventh-generation iPhone is called iPhone 5S.
According to the analyst, the iPhone M will have tremendous success with the public, selling anywhere from 92-99 million units in Apple’s fiscal year 2014 – Apple’s new fiscal years start in October of each year.
iPhone M will account for 53% of sales next year, and they’ll make up for 3% of iPhone sales this year – thus, the analyst is also suggesting the new low-cost iPhone may be arriving before the September quarter ends, which is Apple’s fourth quarter in fiscal year 2013.
However, the analyst notes that these are just estimates for the handset, and it’s not yet clear how it will impact Apple’s business. Milunovich expected the iPhone M to cost $379, but to only offer Apple a gross margin of around 32% compared to the 55% gross margin of the iPhone 4/4S, which the iPhone M would replace:
“Because the M has such a lower gross margin than the 4/4S, the M reduces earnings in our model. iPhone gross profit declines by 4% or $1.6bn with the iPhone 5/5S profit up $4.9bn and the 4/4S/M profit down $6.5bn. The net iPhone impact is a reduction to F14E EPS of $1.16.”
He further explains that at 92 million iPhone M units sold, Apple’s profit would be diminished, while at 99 million “the gross profit impact would be neutral.”
Milunovich’s report also looks at iPad and iPod sales, with the analyst concluding that growth is slowing for both devices when compared to the iPhone.
The analyst says that the iPad growth will be lower than of the iPhone, explaining that, surprisingly, the whole tablet market is growing slower than expected. Even so, Apple is expected to sell 84 million iPad units next year, and 74 million this year – the Street expects the company to sell 87 million tablets next year.
However, the launch of new iPad models may affect the growth of the tablet:
“With two new tablets anticipated over the next few quarters, perhaps the iPad is in a lull and will jump to a higher unit plateau as seasonality proves more important than saturation. Our view is that the iPad is being accepted faster but likely will not be as important as the iPhone over time. This story could play out in other new categories Apple proposes—a fairly fast benefit with rapid acceptance but a shorter half-life of earnings impact.”
Milunovich sees Samsung and Lenovo as the main tablet rivals for Apple next year.
Overall, the analyst says that the tablet market will increase to 235 million (2014), 301 million (2014) and $367 million (2015).
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The iPad Mini 2 is the tablet to beat all tablets, possibly

If the rumors about the iPad Mini 2, due to be released before the end of 2013, are true, then the latest Apple tablet could be the tablet to beat all tablets. No, I’m serious.
I have been writing about the iPad since before it was even announced. Months prior to the day when Steve Jobs stood on stage and presented the iPad to the world there were rumors galore that Apple’s next big product was going to be a tablet. And so it came to pass.
However, in all the time that has passed since then I haven’t purchased an iPad. The reasons are many and varied, but the iPad Mini 2 may just be good enough to make them all inconsequential. At least if the current (and fairly persistent) rumors are to be believed.
The leak suggests that the iPad Mini 2 will feature a Retina Display boasting 2048 X 1536 pixels. This is the same number the full-sized iPad boasts, but crammed into a 7.9-inch screen. The iPad Mini 2 may also feature a dual-core A6X processor, which would be a big improvement on the current model.
Furthermore, the iPad Mini 2 may have slimmer bezels, an 8-megapixel iSight camera on the rear and a 2-megapixel FaceTime camera on the front. Last but not least will be an improved battery and a slightly larger body to comfortably house it.
I’ve always argued that the 7- to 8-inch tablets are the most versatile and useful, and this would fit that bill. And with all the small annoyances and disappointments from the original iPad Mini corrected this could be a very easy tablet to sell to the masses.
The only sticking point may be the price. Apple is struggling to innovate in the way it was a decade ago, with incremental upgrades to its existing product line becoming standard procedure. But it has one trick remaining up its sleeve… a healthy price cut.
If the iPad Mini 2 is cheaper than the original then it could be the essential tablet to own. On paper it looks the business, but will Apple and Tim Cook deliver the goods?
Posted in iPad, News, Opinion, Rumor | No Comments » Read more from Dave Parrack
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This Week’s Apple Rumors, Ranked From Dumbest to Most Plausible

Next gen Retina display MacBook Pros are rumored to be delayed until October. Photo: Peter McCollough/Wired
Each week, there are dozens of Apple rumors, reports, and patent filings that hint at what’s coming out of Cupertino next. Some are legit, but most are totally bogus. We parse the week’s rumors for you, ranking them in order from “utterly ridiculous” to “Duh, of course.” First up…
VERY DOUBTFUL: Apple discontinuing iPhone 5 in favor of iPhone 5S, cheap version
Korean ETnews.com (via MacRumors) reports that Apple is going to ditch iPhone 5 production this fall, instead pouring its efforts into the iPhone 5S and a purported cheaper plastic model.
While it would make sense for Apple to ditch the iPhone 4 and 4S in order to move to an exclusively Lightning dock connector product line, it would surprise me if the company completely abandoned production of the iPhone 5 given their current tiered lineup of iPhone models. Apple is seeing a lot of success with the free (on contract) iPhone 4 among price-conscious consumers.
ASK AGAIN LATER: Apple to ship Haswell-powered Retina MacBook Pros in October rather than September
Apple’s next iteration of MacBook Pros may not ship until October, according to a report from the China Times
(via AppleInsider). Part of the reason is yield problems with the Retina display models, something that’s been an issue with its high resolution displays from the beginning.
It’s possible that Apple could introduce new MacBook Pros at an event in September, but not have them ship until October. When Apple unveiled its latest iMacs, the 21.5-inch model didn’t begin shipping until November and the 27-inch began shipping in December.
SIGNS POINT TO YES: Apple’s Q4 guidance implies iPhone launch by late September
Apple provided financial guidance for its upcoming quarter during its earnings call on Tuesday. Based on Apple’s proposed revenues, financial analyst Walter Piecyk of BTIG’s thinks Apple will be debuting its new iPhone (and other products) before September 28. It certainly makes sense.
Tim Cook has said, on more than one occasion, that Apple has some “really great stuff coming in the fall” and in 2014. Last year, the iPhone 5 was released in late September. While Apple could feasibly debut its new fall products in October, these signs make it seem like September is far more likely. (But, as we mentioned above, some products could be introduced in September but not ship until October or later.)
WITHOUT A DOUBT: Apple testing iPhones and iPads with larger screen sizes
Doesn’t this go without saying? Apple is constantly testing devices with different form factors and different screen sizes. Before the iPad debuted in 2009, Apple was rumored to be testing a tablet in three different sizes. The company has since decided that a smaller 8-inch tablet is a welcome addition to its iPad lineup. And of course, Apple did decide that a 4-inch iPhone was more optimal in today’s smartphone environment than the 3.5-inch size of the iPhone 4S and its predecessors.
Whether or not larger iPhones or iPads ever actually surface, I would be incredibly surprised if Apple hasn’t seriously toyed with the idea.

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Apple’s new commercials fail to inspire

Apple was once the king of commercials, with its ads being head and shoulders above the competition. Unfortunately that’s no longer the case, with Apple’s new iPad ads failing to inspire. Other companies, including its sworn enemy Microsoft, are happily filling the void left by Apple’s disappearance into the advertising abyss.
Apple recently unveiled several new ads for the iPad. The ones released so far have been titled Alive
, Together, and Hollywood (embedded below), the latter making its debut during the 2013 Academy Awards. They’re all OK, but just “OK” doesn’t compare to the quality of commercials Apple has become renowned for over the decades.
Part of the problem Apple faces is that for the first time in its history it’s absolutely on top. The world is changing, and the post-PC era has definitely arrived. This means that Apple, with its trio of iPad, iPhone, and iPod goodness, is at the peak of its powers.
This is a problem, though it’s obviously a nice one to have. Everybody has heard of Apple, knows what products it sells, and knows whether they want one and whether they’re ever likely to buy one. Which makes commercials much less important in terms of turning people onto the company and its wares.
The knock on effect of this is that the drive to innovate and be creative has been removed. When Apple was the underdog it took an incredible effort to get people to even notice the company. Now, it’s the other way around, with insipid and uninspiring commercials only likely to turn people off.
In other words Apple has become Microsoft, the company that never quite got advertising because it never actually needed to do so in order to make money. Microsoft has more recently broken out of this decades-long funk and released positive adverts with a strong message at its core. Because it’s had to in order to stay in the game.
The question that must be asked then: Has Apple got too big, too successful, and too powerful to really care what promotional efforts it’s pumping out into the ether?

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A new use for your iPad: Toilet Training with the iPotty

One of the reasons the iPad has sold in such high numbers, and kick-started the tablet revolution to boot, is the sheer variety and number of things you can do with the Apple device. However, I doubt whether anyone had thought of this particular use before… until now. Meet the iPotty, a training toilet designed to house an iPad.
I have neither an iPad or children, but if I did, I’d try and keep the two as far apart from each other as possible. An iPad isn’t exactly cheap, and kids aren’t exactly known for taking care of expensive gadgets. However, for those parents that can afford the risk, the iPad offers a possible learning tool for children that’s simple and intuitive to use.
The iPad is so simple to use that even the youngest children can get to grips with it quickly. To the point that it may even help to entertain them while they’re learning to use the toilet.
That’s the essence of iPotty, a new product from CTA Digital that was on display at the recent CES 2013 in Las Vegas. The iPotty is a normal potty with the addition of a stand designed to accommodate an iPad. The idea is that kids will be much happier to sit on a plastic toilet waiting for nature to take its course if they have a tablet loaded with apps in front of them.
There are no specific apps designed for use with iPotty, but there are existing toilet training apps available. Personally I’d put Angry Birds
on there instead, or load the iPad with cartoons and press Play as soon as the child sat down to do their business.
The iPotty also comes with a screen guard and a seat cover so that it can be used on other occasions. According to BBC News the product is set to go on sale in March priced around $40.
Posted in iPad, News | 1 Comment » Read more from Dave Parrack
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