WithApple 's (
) sixth-generation iPhone not expected until October, the
Cupertino, Calif.-based company is potentially facing two
quarters of restrained sales growth.
Apple's iPhone business accounted for 58% of the company's
sales in the second quarter. Its iPad media tablet business was a
distant second at 17% of sales, followed by Macintosh computers
Many smartphone buyers held off on buying last year's model,
the iPhone 4S, because it lacked high-speed 4G LTE wireless
connectivity. That's expected to be in the so-called iPhone 5.
Other potential iPhone buyers were disappointed that the 4S
didn't sport a new design. The next iPhone is rumored to have a
larger display and new chassis.
Analysts see a sales slowdown ahead of the new iPhone launch,
which could impact fiscal third-quarter results, out late
Tuesday, and September quarter results.
But will this summer slowdown be a pause that refreshes?
Some on Wall Street believe Apple could miss Q3 forecasts and
provide conservative guidance for Q4. Janney Capital Markets
analyst Bill Choi is among them.
Bracing For 'Miss'
"We are bracing ourselves for a potential miss and a guide
down," Choi said. "We're heading into a bit of a pause, or a
vacuum, before the iPhone 5 and the holiday season starts."
The next two quarters will be "choppy" for Apple, says Sterne
Agee analyst Shaw Wu.
Last year, it only had one quarter of disruption before its
iPhone 4S release in October. But that handset was seen as an
incremental upgrade, and expectations are running higher for the
iPhone 5, he says.
Apple hasn't said boo about its next iPhone but might make
veiled references to an upcoming "product transition" in its
earnings call Tuesday, Wu said.
More important than 4G will be a new design for iPhone 5,
analysts say. The current iPhone 4S looks like the iPhone 4,
which debuted in June 2010. Consumers are attracted to the latest
fashions, whether that's clothes or portable electronics, Choi
"We're looking for a different form factor this time around to
get the upgrades really moving," Choi said. Owners of the iPhone
4 will be coming off their two-year service contracts and will
want a distinctive new device. If, as rumored, the iPhone 5
features a larger display and a new body, that could fit the
A survey released Monday by ChangeWave Research finds "an
unprecedented wave of advance demand for the next generation
Paul Carton, ChangeWave's vice president of research, said
pre-launch demand for the iPhone 5 is "strikingly higher than
we've seen for any previous iPhone model."
In a June survey of more than 4,000 consumers in North
America, 14% said they were "very likely" to buy the new iPhone
and 17% said they were "somewhat likely" to buy it. That compares
with 10% "very likely" and 11.5% "somewhat likely" to buy the
iPhone 4S in an October survey.
Meanwhile, Apple is facing increasing competition from handset
manufacturers usingGoogle 's (
) Android operating system. Samsung is the leading Android phone
maker, but Google's recent purchase of Motorola Mobility gives it
a hardware division.
Android passed Apple's iOS as the leading smartphone operating
system last year, but its popularity will be put to the test by
the iPhone 5, Wu says.
Apple could see a large number of disenchanted Android users
switching to iPhone this fall, he says. Many of those users were
attracted to cheap smartphone deals or wanted 4G or a larger
display than the iPhone offered previously.
"We think there's a good chance that a lot of them will switch
over to iPhone when their contracts are up," Wu said.
The new iPhone will run on iOS 6, which contains a host of
compelling new features, such as turn-by-turn navigation,
integration withFacebook (
) andYelp (
) and Passport to store boarding passes, sports and concert
tickets, loyalty cards and coupons.
Google is unlikely to secure similar deals with online
services Facebook and Yelp because it competes with them using
Google+ and Google Local, respectively, Wu says.
Also reportedly on the horizon for Apple is a smaller-size
tablet, dubbed the iPad Mini by industry observers.
It would feature a 7- to 8-inch screen and would complement
Apple's existing iPads, which have a 9.7-inch display.
Speculation has that product coming out in October as well.
The iPad Mini also would give Apple a play in a market now
dominated byAmazon (
) with its Kindle Fire and Google's new Nexus 7 tablet.
Closer at hand, Apple is expected to launch its next Macintosh
computer operating system, Mac OS X Mountain Lion, on Wednesday.
That could give Apple's notebook and desktop computers a sales
One area Apple could surprise Wall Street with its Q3 results
is on its gross profit margin, which should benefit from
favorable component pricing. Prices for NAND flash, memory and
displays have been down lately, lowering the bill of materials
for Apple's products, Wu says.