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Analysts: iPhone 4S a plus despite some disappointments

updated 10:15 am EDT, Wed October 5, 2011

Apple may be holding onto profit margins

The announcement of the iPhone 4S is a good thing overall, even if yesterday's event was somewhat disappointing, analysts suggest. Sterne Agee's Shaw Wu remarks that many people were expecting an iPhone 5 with a larger screen and thinner shape. Needham's Charlie Wolf, by contrast, concentrates on the absence of an expected "iPhone Lite," even if Apple did drop the prices of older hardware. UBM TechInsights' VP of technical intelligence, David Carey, describes the 4S as a "modest technology bump," equivalent to the transition from the iPhone 3G to the 3GS.

He argues though that "the software experience" -- made possible by "good-enough" hardware -- is ultimately what people care about. In general the analysts note that the 4S is still a significant upgrade, including an A5 processor, an 8 megapixel camera and other perks like the Siri voice assistant technology. Apple should also benefit from the addition of Sprint and KDDI as carriers, plus iCloud and the arrival of iOS 5.

"The initial negative reaction to iPhone 4S reminds us of the launch of iPhone 4," says Wu. "We want to remind people that very few (if any) predicted the iPhone 4 would be successful. It had a rocky start in June 2010 with widespread press coverage on its controversial antenna design. But it turned out these concerns were overblown and misplaced as iPhone 4 went on to be the best-selling iPhone by a wide margin."

Carey mentions that Apple is probably holding onto the same "healthy" profit margins it achieved with earlier iPhone releases. The 4S' bill of materials is estimated to be the same as for the 4 at launch, roughly $203 for a 32GB device. This assumes a $26 pricetag for the A5 processor and $31 for a Retina display.

"While iPhone 4S may be seen as a mild disappointment by investors as it retains the form factor of iPhone 4, we believe the model features several important hardware upgrades," summarizes Canaccord Genuity analyst Mike Walkley. "Further, we believe compelling new capabilities in iOS 5 and iCloud will generate strong sales of iPhone 4S and increased iOS ecosystem stickiness to generate future recurring device sales." Walkley has raised his 2011 EPS estimate from $27.29 to $27.77, and a 2012 EPS forecast from $32.13 to $32.24.




by MacNN Staff

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Comments

  1. lysolman

    Joined: Dec 1969

    +15

    equivalent to the transition from the iPhone 3G to

    What?!!! Is this David character smoking crack? How is the embarrassing "upgrade" of the 3GS equivalent to gaining a dual-core processor, 1080p video, and a seemingly remarkable new way to communicate with your phone.

  1. prl99

    Joined: Dec 1969

    +12

    larger phone?

    It's difficult to figure out who these people are the analysts think want one thing over another. I bet most of them just make everything up in an attempt to drive a product in the direction they want it to go. They use their apparent status as market analysts to manipulate everything they can. Nobody has ever asked me what I want, why should I believe anything these people say. I'm also tired of all the leaks of supposed prototype iPhones. I bet most of these are made up in an attempt to further manipulate stock prices. That's what this whole mess is all about, it has nothing to do with whether this iPhone is any better or worse than the last one (better, actually much better in my opinion--there, I gave you my educated analysis of the iPhone 4S). What rules say every new iPhone model has to be designed differently. BMW made a great living selling the same looking (on the outside) cars for years. They didn't follow the American method of constantly changing, not necessarily upgrading, the look of their cars every single year. The demand by investors that Apple change anything is stupid. They don't run the company, they just participate in one big casino with one motive only, to make themselves money. This has nothing to do with any product, it's all money so all analysts and investors can take a dive off the Golden Gate Bridge for all I care. I like the iPhone 4S and will probably buy one in the next few months.

  1. Bobfozz

    Joined: Dec 1969

    +10

    investors, for the most part...

    are morons. The stock goes up one day and down the next based on what "Greece" or some other excuse is doing. The guys who buy and sell are making money but the actual Investors are clueless.

    Apple DID NOT promise an iPhone5! These were Expectations brought to the forefront by analysts who should be FIRED by the investors. They were gathered by rumor mills and web sites who were looking for any kind of bump in readership. They should be FIRED. It's not that there isn't enough "news," it's that there is a dearth of reliable news.

    Idiot investors deserve what they get and it sounds like they get a lot of Hot Air for which they blame Apple. We have ALL seen in the past that if there was a new form factor, new hardware, new features, Apple stock would still "tank" the day of introduction by those wanting to make a profit (but could they ever buy back in?....yes!).

    It's not about any of these things. Apple produces items people WANT... these road kill investors should watch and read about the two new stores which opened in China--100,000 people through the weekend! That's what they should be looking at.

    Who would really want to have people (investors) like these for financial friends?

    Comment buried. Show
  1. aSevie

    Joined: Dec 1969

    -16

    Need a little more...

    3.5" screen...lame.

    Comment buried. Show
  1. facebook_Robert

    Via Facebook

    Joined: Oct 2011

    -18

    Get a grip people

    Dual-core comes out - Android gets dual-core. Larger screens come out- Android gets it, and that's not all, they continue to sell 3.5" devices, and even smaller devices.

    The reality is Android phones are coming out every month and if you have a preference for a phone - there is an Android for that.

    But Apple doesn't operate that way - they wait a year or two, but then deliver something that just makes you sit back and say - wow, wow! it was worth the wait.

    Except when they don't. That's the problem, 16 month wait for a typical Android-style speed bump. Geezuz, and some of you are in denial about it. If all they were going to do was slap in the A5 - they should have done that 6 months ago.

    $90 billion in cash, but they decide to protect their margins. Well OK, that's great if you can do it.

    But look, right now the iPhone 4S is not stealing the spotlight. That's now going to the Samsung Nexus Prime announcment next week. And all the excitement will be in the Android camp - not over a modest speed bump 16 months that apparently took 16 months to figure out.

  1. prl99

    Joined: Dec 1969

    +11

    Android, the new PC

    Android phones are the new PCs, they quickly cobble together a bunch of parts and put it on the market, without any idea of whether it will really work. Apple takes time to produce a quality product where every component they include has been included for a reason, not just to be like everybody else. I like the size of the iPhone, I don't want a larger phone. Anything large and it wouldn't fit in my front pocket (never put anything in your back pocket that you don't want to lose). Saying that Android phones always come out with new designs and hardware sooner than Apple is the same lame statements people have made forever when talking about Mac vs. PC hardware. I could care less is Android comes out first, their entire product still doesn't come close to what Apple offers. As for CPU speed challenges, I don't hear that lame excuse for buying faster PCs anymore. Apple debunked that fallacy and they'll do the same with phones.

  1. SierraDragon

    Joined: Dec 1969

    +8

    David Carey is in the wrong biz

    "David Carey, describes the 4S as a "modest technology bump," equivalent to the transition from the iPhone 3G to the 3GS.

    The tech "bump" was a large jump - duh! A4 to A5 is major, 7x graphics improvement is major, a GB of RAM is major, 1080p stabilized video is major, the new camera is major, and my guess is that the new antenna will prove to be very major.

    My other guess is that the integration of A5 and a GB of RAM will be a very significant improvement as regards real-world operation of the intense new apps, especially Siri.

    Why so many folks are incensed about a need for visible changes in a beautiful, best-selling form is beyond me, even though my old eyes would appreciate a larger display.

  1. Foxypaco

    Joined: Dec 1969

    +6

    What's sad

    is that if the iPhone 4S had a different/new case, then no one would be complaining.

    Comment buried. Show
  1. testudo

    Joined: Dec 1969

    -10

    Re: David Carey is in the wrong biz

    The tech "bump" was a large jump - duh! A4 to A5 is major, 7x graphics improvement is major, a GB of RAM is major, 1080p stabilized video is major, the new camera is major, and my guess is that the new antenna will prove to be very major.

    No, you're in the wrong biz. People keep saying that iPhones are about the experience, Android is all about the specs. So, when it suits you, you start crowing about the specs?

    As a phone, even a smart phone, it's basically the same phone as last year, with some speed and camera improvements. That's a 'modest' bump. Sorry you can't handle it, but that's what it is.

    Why so many folks are incensed about a need for visible changes in a beautiful, best-selling form is beyond me, even though my old eyes would appreciate a larger display.

    Why the need for visible changes? Easy. The iPhone is a decoration, a piece of your 'outfit', if you will. Many people have one because it's the "it" device (like so many people walked around with iPods). As such, upgrades will not be as strong from v4 to v4S, since there's no major style change to the device to warrant it (sure, if you want faster this or that, but not many care so much).

    Sure, there will be sales to the fanboy crowd who must have the latest and greatest, no matter the cost. And the 2-3 year old iPhone users now might find it worth upgrading to. But the older iPhone users might decide to just keep their 3gs and wait until something really new comes out.

    And since a large proportion of iPhone sales go to upgraders, this information may indicate a less than spectacular sales quarter.

  1. JEB

    Joined: Dec 1969

    0

    iPhone "Lite"

    I guess the now $0 iPhone 3G = the iPhone "Lite" . . . must be some major inventory there -- can't imagine Apple still actually producing them!

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