Apple (NASDAQ:AAPL) is likely to unveil a new, bigger iPhone in the coming months, and investors are obviously enthusiastic about it. But aside from the benefits of a faster and rumored larger-screen iPhone 6, there's also the added benefit that Apple could improve sales of its older devices when the next iPhone launches.
How to make new money from old devices
A recent article by AppleInsider pointed out the following March quarter iPhone 4S stats, determined by Charlie Wolf of Needham & Company:
- The device made up about 25% of iPhone sales;
- An estimated 10 million iPhone 4S units were sold;
- 85% of iPhone 4S customers weren't previous iPhone users; and
- The 4S contributed to the iPhone's better-than-expected March quarter.
So why does this matter? Because the device is nearly three years old, runs a much slower processor than Apple's current offerings, and has a screen size of just 3.5 inches -- the same size of the original iPhone that launched back in 2007.
Nearly everything about the iPhone 4S' specs should make it unappealing to smartphone buyers. It's not cheap if you buy it unlocked, still coming in at $450, and there are far more powerful and feature-rich Android devices at a better price.
And that's why a new iPhone 6 could be great for Apple's lower-priced iPhones. Because when the device debuts, Apple will either drop the price of the 4S and make it even more appealing or push the current iPhone 5c -- or even the previous iPhone 5 -- into the lowest-priced slot, giving customers a bigger and better phone for the same money.
Let's think about this for a minute. Apple's small, old iPhone 4S is still selling like gangbusters and a newer, faster, and bigger screen device -- let's just say the current 5c -- is about to take its place. Add to all that the fact that the 4S doesn't even have LTE, and any device that takes its place in the iPhone lineup will. It's clearly within the realm of possibility for the 4S' replacement device to perform just as well as the 4S has, and possibly even better.
But what if it doesn't?
Still big potential for the smaller screen
Let's play devil's advocate for a moment and assume that the iPhone 5 or 5c doesn't sell as well as the 4S has for Apple, after a new and bigger iPhone launches. If that happens, or hopefully before, Apple could keep the 4S around for a while, as it did the iPhone 4 in China, to keep low-end sales going. The iPhone 4 was always one of Apple's secret sales weapons, and the 4S could be the same.
If Apple releases a (rumored) 5.5-inch and 4.7-inch iPhone, it will extend the company's reach in price points and screen size. While it's still unclear exactly which screen sizes and iPhone models Apple will release this fall, any change to a larger display should help sales at the bottom of its iPhone lineup. The iPhone 4S helped boost this past quarter's device sales, and the next model up being faster, bigger, and LTE-equipped could help do the same for Apple.
Fool contributor Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.