Investors are concerned as they don’t see the same hype as iPhone5 building around an iPhone6 which might be launched in the fall of CY13. This has led investors to ask-“What next?” We continue to believe that Apple (NASDAQ:AAPL) will have considerable value going forward also. Apple being the innovative giant it is, we won’t be surprised if it launches yet another chain of products as it has done with introducing the first mac, the first iPod, the first iPhone and the first tablet (Maybe Apple is researching iAppliance in some secret lab!). As we can’t know what is going inside the headquarters of Apple right now, we will be talking about the strategies that could help Apple deliver in the future after the launch of iPhone5.
To begin with, we expect that Apple will be providing iPhone 4S, its recently outdated model at a much lower price in the developing markets after the launch of iPhone5. We have seen this in the past as Apple has provided its 3GS 8GB phone at $375 and we expect to see it in the future but at a much lesser price point. We believe that this kind of offering would accelerate Apple’s share gain in the emerging markets and consequently increase investor confidence in the sustainably of Apple’s overall growth.
While offering outdated models at lowered price might result in a downside to the ASP’s for Apple, we believe that Apple would ultimately benefit through the volume growth in the price sensitive developing markets such as China. We also believe that a low cost iPhone would provide Apple with an opportunity to fight with low-price smartphone manufacturers like Samsung, Nokia (NASDAQ:NOK) and HTC in the developing markets. With Apple already having a majority stake in US (Around 50%), this move could position Apple to increase its standing in the emerging markets also.
Furthermore, we continue to believe that Apple will announce a smaller 7-8″ iPad along with the iPhone 5 later this year. We continue to see significant growth implications for Apple with this launch. While we believe that the financial implications for Apple will be minimal as Apple might have to enter at a lower price, the strategic implications far outweigh the financial ones. We believe that the major portion of the tablet market that Apple doesn’t own is currently made up of 7″ tablets. Thus, if Apple can capture 50% of the 7″ tablet market, which should be achievable given Apple performance and past track records, the company would further strengthen its utter dominance in the growing tablet sector. We believe that Apple with its entry into the lower price segment is trying to maintain its leadership position in the tablet market and prevent competitors like Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) from increasing their market share. We believe that this move might also increase up-sell opportunities for Apple as Apple products have shown higher level of stickiness with users with intent to repurchase in the past.
While there are rumours in the market that Apple may not launch an actual television, we continue to consider a possibility. Piper Jaffray analysts recently cited that “Our confidence that the Apple Television is real, is primarily based on our checks with component suppliers, as well as Steve Jobs’ biography, and Tim Cook’s comments on the June conference”. We continue to believe that if a TV is launched, it could work as a potential catalyst for the stock.
Apart from that, we believe that the recent trial win of Apple against Samsung will open the way for several infringement trials against Google, Samsung and Android OEM manufacturers in different part of the world. If such trials succeed elsewhere Apple products could see incredible growth in those areas at the expense of Google’s Android. As we continue to believe that Apple is poised to grow in the emerging markets with the launch of a lower priced iPhone and maintain its dominant position in the tablet market with an iPad mini, we maintain our buy rating on Apple.
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