We believe Apple can sell a 4.7" iPhone at a subsidized price of $299, which should generate incremental gross profit on replacement sales and attract new customers that had previously purchased Android phones specifically for a larger screen ...
Ciaccia goes on to cite numbers from Hargreaves that make sense. But I'll take it a step further and make a more qualitative case.
I don't care how big the screen is. However, I like the sound of iPhone Air if it's as amazing as iPad Air.Something about Apple -- maybe the most important thing -- gets lost in all this talk about "innovation" and new product categories. Apple has no reason to beholden itself to the tech media's definition of "innovation" or rush something to market that's not ready for primetime (the way it did with Siri). We're quick to forget that Apple has an incredible business that, for all intents and purposes, has become turnkey. That's not to say it is resting or can afford to rest, but consider the "replacement sales" Hargreaves spoke of. Every two years or so, iPhone users become eligible for an upgrade. I'll be in that situation in August. Right now, I have an iPhone 5. Not the 5s or 5c. When I looked at the new models I didn't feel like I was missing much. However, after two years -- so, basically, every other iPhone -- things feel different. If iPhone Air wows me like iPad Air has, I will feel as if my two-year old iPhone 5 has become obsolete. And I'll upgrade for what I reckon will be a much-faster iPhone than I own now. I don't want or expect a whole bunch of bells and whistles added to a phone I already love. In fact, if Apple changes iPhone too much I might worry.
It's not broke so Apple has no reason to fix it. It risks making a grave error if it -- for no good reason -- tries. It's the upgrade cycle that's so powerful for Apple. Along the way, the halo effect creates new Apple devotees who end up owning multiple devices and wonder why they didn't make the switch sooner. We operate in a world where we pay attention to the stock. This focus hurts our ability to get a handle on reality. What AAPL does is not indicative of what's happening -- or what should happen -- at Apple. It's difficult to remember this when you hear daily gasps about Apple's underperforming stock in the financial media and a pretentious tech media creating its own misguided and uniformed definition of "innovation." I want Apple to do something cool and different as much as the next guy. But that last thing I want is for it be as subpar as Siri. I want it to be every bit as good as the iPads, iPhones and MacBooks I'll upgrade, like clockwork, every two years or so. While lots has changed under Tim Cook, a couple things haven't. Apple's core business of producing and selling beautiful hardware (in large part to repeat customers) has not changed. It has barely missed a beat if you step back and consider the numbers with some context and a grasp of history. Cook knows this, therefore he's not changing Apple's overarching (or underlying ... however you like it) course.
Cook's not pushing innovation for the sake of innovation (or to satisfy a fickle and clueless media gaggle). And he's not managing to the stock price.
While Wall Street types occasionally make comments worth repeating, they're the last guys the greatest consumer products company in the world should be listening to. Follow @rocco_thestreet --Written by Rocco Pendola in Santa Monica, Calif.