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Phablets Are Just a Fad

NEW YORK ( TheStreet) -- Everyone is trying to figure out what's going wrong with Apple (AAPL), as if there's a problem to solve. Analysts lead the fray, with their speculations, anecdotal data and bizarre conclusions. Most lead with the childish notion that big and flashy is better, like those AT&T (T) ads with the cute kids and the sympathetic guy in a suit.

Apple analysts see Phablets as the next revolution in mobile, because it's big and flashy, and because they can't think of anything else that might be affecting stock price. Perhaps they should look inward and see that it's more than likely the fear, uncertainty and doubt (FUD), which these very same analysts have created. Analysts are a scourge on investors.

Phablets are those oversized mobile phones with an identity crisis, like the Samsung Note, that are almost big enough to be mini tablets. But phablets are not tablets, they are grotesquely oversized phones that have caught the attention of people drawn to big and shiny. And while big and shiny might enthrall some kids, Big Data shows Phablets to be nothing more than a fad.

According to Flurry Analytics, who take in and analyze over 1.4 billion mobile app session reports every day, from more than 80% of all mobile devices, there's a clear trend of use by size of the device.

In a nutshell, there are four categories of devices that Flurry Analytics tracks; small (Blackberry), medium (iPhones), a little bigger than medium (phablets), and large (mini and full-sized tablets). Small devices, like the original Blackberry, represent about 14% of devices and are dwindling fast... this form factor is on the way out because these devices are older, too small for apps (even if they existed), and quite frankly, they suck by present-day standards...hence the release of the new Blackberry Z10 (medium sized), another iPhone knock-off.

Medium-sized devices, with screens between 3.5 inches and 4.9 inches, like the iPhone, Galaxy, HTC and LG, make up the vast majority of devices, nearly 70%. Phablets are new, so only make up about 2% of all active devices out there, while tablets like the iPad represent 17% of devices. But the data on phablets is still extensive enough to garner usage habits.

Now the interesting thing is the distribution of active users and time spent on these devices, when categorized by size. And the facts are that apps on medium and large devices, as a percentage of the numbers in use, are used an overwhelmingly greater amount of the time. In other words, people with phablets are not finding them as useful on a day in, day out basis. These differences are statistically significant.

So, back to the Apple analysts who think the iMaker should embrace the phablet, that somehow it will be their saving grace. Well, they are full of s#*t, Big Data does not support this in any way. Apple has it right, the size of the iPhone screen is just about perfect for its category; and the size of tablets is perfect for its category. Phablets are stuck somewhere between, searching for an identity and users.

Now let's go back to why Apple stock price has been falling. I believe it's due to a confluence of an unusual combination of events and the times in which we live. The mobile device market is still very young, and the evolution of product lines is still being worked out, like Darwin's natural selection. There have been challenges that continuously help define these selections, including economies, consumer sentiment and analysts bloviating FUD.

Apple had it right from the start; it chose medium and large, the iPhone and the iPad. Of course, with small phones going the way of the Dodo bird, the iPhone might be considered small, unless iWatches take that spot, and the iPad Mini tablet is a variation of the large category. Phablets are nowhere, searching for an identity, they are a fad.

-- Written by Ernie Varitimos, author of the Apple Investor blog.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Ernie Varitimos has a long history with Apple as an investor, trader and consumer of its technology. He started his career as a rocket scientist and has spent the past 25 years driving, controlling and influencing technology in the financial industry. Ernie is a former hedge fund manager and current futures trader.

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