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It Turns Out that the iPhone SE is a Winner
Apple Inc. (NASDAQ:AAPL)
Date Published: 7-21-2016Author: Ophir Gottlieb
Preface
It turns out that the Apple Inc. (NASDAQ:AAPL) iPhone SE is looking like a huge winner in the smartphone wars.
STORY
Apple Inc. is going to show its first ever year-over-year decline in iPhone sales. That reality has sunk in and it has kicked Apple Inc. stock price in the teeth. But there is a glimmer of hope for Apple before the launch of the iPhone 7 this September, and it's the iPhone SE.
The iPhone SE is a small screen phone but with amped up technology, making it a sort of hybrid super powered iPhone 5. While iPhone sales have stagnated in 2016, this one gem is moving the needle to upgrade older iPhone owners.
Mac Rumors reported on data that came from Consumer Intelligence Research Partners and UBS analyst Steven Milunovich, and it was rather telling.
In the previous quarter, 16% of iPhone 4s users had upgraded to new devices. But with Apple's introduction of the iPhone SE, which has a small screen and is by far the least expensive iPhone ever, we see that 26% of iPhone 4s owners upgraded to a new iPhone for the current quarter. That's a winner, but hardly the story.
THE BIGGER STORY
While there will be talks of cannibalization by the less expensive Apple Inc. iPhone SE of the iPhone 6s, that's not really the issue and it's also likely overstated. Apple Inc. introduced the SE for two reason. First, to go ahead and recapture upgrade cycles for price sensitive or screen size sensitive iPhone owners as well as non-iPhone owners. But really, the iPhone SE was built to win a revolution.
The revolution we speak of is the move Apple Inc. is making into India, which is now the second largest smartphone market in the world, trailing only behind China. The Indian consumer has less disposable income than the American or Chinese consumer so a less expensive iPhone is needed, especially after the Indian government did not allow Apple Inc. (NASDAQ:AAPL) to sell refurbished iPhones in the country.
With the shattering of the old rules that strangled Apple in India, the iPhone SE is now Apple's conduit to a winner in this enormous market. For the full details on the Apple entree into India, we refer to our prior dossier, Breaking: Apple Has an Enormous Opportunity in India.
The author is long shares of AAPL.
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