Apple Could See a Flurry of Upgrades With the iPhone 6

Apple (NASDAQ: AAPL  ) has a slew of iPhone users who are ready for an upgrade. It will be imperative, however, for Apple to keep its mostly loyal consumer base from switching to phones using Google's (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) Android, such as those made by Samsung (NASDAQOTH: SSNLF  ) . Samsung is coming off a disappointing quarter, however, while Apple is coming off a good one. Moreover, Apple's iPhone users are not easily enticed to switch operating systems.

An upgrade bonanza on the way
All the major carriers, such as Verizon, AT&T, and Sprint, have many users with older iPhone models, chiefly the iPhone 4 and 4s. T-Mobile is the only exception, with its iPhone 5c and 5s users making up 41% of its total iPhone user base.

For Verizon, over half (56%) of its iPhone users still have the iPhone 4 and 4s models. Moreover, 24% of Verizon's iPhone users still use the iPhone 5, and an even smaller proportion, 17%, use the iPhone 5c and 5s models. Therefore, a large number of users could upgrade to the new iPhone 6 when it is released.

The iPhone 4 and 4s models are currently used by 42% of AT&T iPhone users, while 25% use the iPhone 5 and 23% have the iPhone 5c and 5s versions. So, a large proportion of AT&T iPhone users could upgrade to the new iPhone 6, another possible boon to Apple's earnings.

Sprint's iPhone 4 and 4s users account for 47% of its total iPhone user base. Moreover, 24% currently have the iPhone 5 and 27% use the 5c and 5s versions of the phone. So, a substantial portion of Sprint's iPhone users could be making an upgrade as well, like Verizon and AT&T's.

Although not the largest percentage of its iPhone user base, 35% of T-Mobile's iPhone users still have the 4 and 4s models. Further, 24% have the iPhone 5 and 41% use the 5c and 5s models. Therefore, a large percentage of T-Mobile's users could also be making an upgrade when the iPhone 6 comes out.

Recent results
Apple increased its revenue, income, and EPS by 4.7%, 7.1%, and 15.2%, respectively, in 2014's second quarter over 2013's. The company generated $10.2 billion of income, equating to $11.62 per diluted share on $45.6 billion in revenue. In contrast, Samsung's earnings have fallen for two straight quarters. Moreover, the South Korean company's revenue decreased considerably, by 9% in its last quarter.

Keeping users on Apple
Most of the carriers have a large number of iPhone users who need upgrades from earlier versions of their phones. The key for Apple is keeping those users from switching to Android or other systems, and maintaining its loyal customer base. A study by WDS, a company that works in customer care for the mobile industry and a division of Xerox, revealed that 76% of people who have an iPhone replace it with another iPhone. Based on that statistic, it seems Apple has little to worry about in terms of users switching companies or operating systems. Therefore, its new iPhone 6 should perform well when it hits the market.

Foolish takeaway
Apple's recent results and past customer loyalty should calm investors' fears that Apple is headed for a downturn. Further, a rumored acquisition of Beats has brought some excitement back to the company and could be used for its future products. With 76% of Apple iPhone users keeping their iPhones after replacement, and many of them needing one, the future looks bright for Apple and the company should realize a flurry of upgrades when it releases the iPhone 6.

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Read/Post Comments (5) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 23, 2014, at 2:18 AM, iphonerulez wrote:

    I see enough articles saying how much Apple is in trouble because innovation is gone so it's nice to see a positive article for Apple for a change.

  • Report this Comment On May 23, 2014, at 7:38 AM, Chiam wrote:

    There are three things that investors of Apple are not realizing.

    1. People like their small phones. They are happy with them. They don't need a new one when the present one still works and they feel comfortable with it.

    2. Why spend the money when you really don't want a new one? Or maybe you don't have the money to waste on an upgrade.

    3. They don't want to transfer things and the headache that can bring it there is a problem. They don't want a larger size phone. They are used to the way the phone works and don't want to learn anything new.

    People forget how far and fast the technology of phones has come. Not everyone needs the new features and not everyone will use them. One day you might be able to walk into a room and think the lights on. But flipping the switch was not such a big deal.

    Upgrades will happen but don't bet that everyone wants one.

  • Report this Comment On May 23, 2014, at 8:05 AM, demodave wrote:

    When I first read the title, I was thinking "technological" upgrades and thought, "Oh, no, another daft articles", but the author has done some real research and has presented data which, if valid, represent a very good opportunity for *user* upgrades. Nice work.

    It does speak to a large population of people whose phones have fulfilled their 24 month contract. Could be good.

    Chiam, you are missing the point on phone sizes. Yes, there may be many customers who prefer small phones, but what Apple has found is that, among high end phone users who *do* choose an alternate to the iPhone, many *are* looking for a larger phone. That is a phone that Apple could well choose to make. The other major alternative in people who choose "some other phone" is a *cheap* phone. That is a phone that Apple is unlikely to make.

  • Report this Comment On May 24, 2014, at 12:00 PM, melegross wrote:

    Most people in the USA buy a new phone every two years. Around the world, many people buy new phones around every 18 months. Other places, it's three years.

    This happens with regularity. Will most people get new phones this year? Likely not. But more people will upgrade than normal because of the new form factor. That happened with the 4. It happened with the 5 as well. Less people upgrade during the off years, even with the, often significant, feature upgrades.

  • Report this Comment On May 24, 2014, at 3:38 PM, riwaterman wrote:

    "Most people in the USA buy a new phone every two years. Around the world, many people buy new phones around every 18 months. Other places, it's three years."

    huh.

    1. in the USA, every two years

    2. around the world, every 18 months AND

    3. "other places", three years.

    Where is "other places"? It is not in the USA or "around the world" so I guess it must be those extraterrestrial visitors????

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