Apple (AAPL 2.54%) may be ready to concede that size matters in the smartphone world.
Topeka Capital Markets analyst Brian White believes that bigger iPhones are one the way.
Now, before we get ahead of ourselves -- dreaming of larger smarpthones and even fabled phablets -- let's frame this note appropriately. White has been known to dream big and wake up empty.
White turned heads last April when he slapped a price target of $1,001 on the stock. Two months later he suggested that the ballyhooed Apple HDTVs could hit the market in time for the 2012 holiday season. Neither vision materialized. A year later, Apple stock is trading at less than half of his price target. Anyone asking Santa for an iTV last year had to settle for an iPad Mini and a bag of coal.
However, he may be on to something this time.
White is trekking through Asia, visiting Chinese and Taiwanese suppliers that Apple and other consumer tech giants rely on for prototypes and eventual production runs. If a source in Apple's supply chain is pointing to two -- and possibly even three -- different screen sizes for this summer's inevitable iPhone 5S rollout, it's a better wager than an analyst at home engaging in wishful thinking.
Go big or go home
The market initially applauded Apple's decision to bump up the size of the iPhone 5. Going from 3.5-inch screens to 4-inch screens gave the stock a boost. Apple shares peaked the day that the iPhone 5 hit the market.
However, with Samsung and HTC embracing larger standards at 5 and 4.7 inches, respectively -- and Google's Android continuing to run away with the market -- Apple can't ignore the call for wireless devices with larger screens.
The iPad recognized the market demand for smaller tablets by rolling out the wildly successful iPad Mini. Now it's time to realize that the even the bigger iPhone 5 may not be big enough.
Analysts have been disappointed to see iPhone buyers flock to the older iPhone 4 and 4S models, but wireless customers aren't going that route because they want smaller screens. They're merely being won over by the notion of saving $100 or $200 on their phones.
BlackBerry's Z10 is off to a slow start this year, and it wouldn't be a surprise to see the smartphone pioneer suffer another sequential dip in subscribers this quarter. Nokia (NOK 3.28%) flooded the market with Lumia phones, and even Microsoft's marketing muscle to push the Windows Phone-fueled devices failed to slow Android's momentum.
Against this backdrop we have Samsung's 5-inch Galaxy S4 coming out later this month, and there's plenty of chatter of Samsung introducing devices with 5.5-inch and 6.3-inch screens later this year. This would naturally be phablet territory, and Samsung has already fared well there with the Galaxy Note line. If Apple is going to go bigger than the iPhone's 4-inch screen -- and if it is introducing three sizes, as White is hearing could happen -- doesn't it stand to reason that one would be a Galaxy S4-sized smartphone rival and the other would be even larger to take on the intriguing phablet market?
The time is right. At a time when Samsung's taking global market share away and squaring away patents for bar-raising eye-tracking technology, no one could merely phone it in anymore in the smartphone realm.
Apple stock has been stagnant as Apple sacrifices near-term margins for the pursuit of mainstream relevance. Why not go "all in" with a phablet before it's too late?
Industry tracker IDC points out that handsets with screens that are 5 inches or larger have exploded from 1.2 million in 2011 to 29.7 million in 2012.
"People are using smartphones in different ways now," IDC analyst Francisco Jeronimo was quoted saying in a Bloomberg article last week. "This is a trend that can't be missed."
The comments were in response to Nokia falling behind by failing to address the phablet market, but it could also apply to Apple.
Apple is a company that has never been afraid to dream big, but now it can't do it exclusively with small devices.