Will Apple Launch Large Screen iPhones? - Analyst Blog

By Zacks Equity Research,

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Reportedly, Apple Inc. ( AAPL ) is planning to launch iPhones with larger screens in 2014. According to The Wall Street Journal, Apple will launch two iPhones, one with 4.5-inch screen while the other one will sport a screen of more than 5 inches.

Per the report, Apple will also stop selling its mid-priced plastic based iPhone 5C, which has failed to gain any traction compared to iPhone 5S in the U.S. and rest of the World. The company is also rumored to build curved iPhones. However, Apple is not expected to launch this type of device in 2014.

The increase in screen size will help Apple to fight competition in the markets of Asia-Pacific, where large screen smartphones are much more popular than in the U.S. Current iPhones feature 4-inch screens, which was increased from 3.5 inches in 2012.

Meanwhile, activist investor Carl Icahn continues to put pressure on Apple's management to approve a new $50.0 billion (over $100.0 billion existing program) share buyback program. Most recently, Carl Icahn bought another $500.0 million Apple share, which took his investment to $3.6 billion.

In a letter to Apple shareholders, Mr. Icahn argued against Apple's policy of preserving cash. He urged shareholders to vote in favor of his share buyback proposal, which in his opinion will boost the company's overall value.

Apple's ongoing share buyback and dividend program will return $100.0 billion to shareholders. However, management under Chief Executive Officer (CEO) Tim Cook has vehemently protested against Carl Icahn's proposal.

As per management, cash preservation is of utmost importance to fund Apple's research and development in order to compete in the fast-evolving mobile market. However, this policy is attracting increasing criticism from investors as Apple has failed to launch any new product, for a considerable length of time.

In such a scenario, Mr. Icahn's aggressive demands will further increase pressure on Apple's management in the near term. We believe that successful launch of new large screen iPhones as well as the much anticipated wearable devices in the near future will provide management some room, going forward.

Apple is set report first-quarter fiscal 2014 results on Jan 27. We believe that strong holiday season sales and the deal with China Mobile ( CHL ) will help Apple to post solid results.  

However, Apple's iOS continues to face significant competition from Google 's ( GOOG ) Android operating system in most of the other markets. The significant decline in revenues in the U.S. and Rest of Asia suggests market share loss to low cost smartphones and tablets produced by Samsung, HTC, LG, Huawei and Amazon ( AMZN ) . This remains a major headwind, going forward.

Currently, Apple has a Zacks Rank #2 (Buy).

APPLE INC (AAPL): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

CHINA MOBLE-ADR (CHL): Free Stock Analysis Report

GOOGLE INC-CL A (GOOG): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: AAPL , AMZN , CEO , CHL , GOOG

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