Speculation about Apple's (NASDAQ:AAPL) out-of-the-ordinary mid-cycle iPhone launch next month have been ramping up recently, suggesting the company really may be planning to release the rumored device. The new phone, which will reportedly mark a return to smaller displays, would be well timed in light of the company's expected tough year-over-year sales comparisons for iPhone during fiscal 2016. Here's a summary of the most recent rumors about the new device, along with a closer look at why the device could play a key role for Apple this year.

Apple's "iPhone 6c"
Here are the rumors:

  • The rumored iPhone will be smaller than the iPhone 6, sporting the 4-inch screen size of the iPhone 5 lineup.
  • The smaller iPhone will assume the current price points of the iPhone 5s, which starts at $450 without any carrier subsidies.
  • Potential names for the device include "iPhone 6c," which would mimic the naming of Apple's iPhone 5c, and "iPhone 5se."

Iphone

iPhone 5c. Image source: Apple.

  • 9to5Mac's Mark Gurman, who has a solid track record with Apple rumors, believes the smaller iPhone will get the iPhone 5se name, with "se" potentially standing for "special edition" or the "e" indicating the phone is an "enhanced" iPhone 5s.
  • The phone's edges will take on the curved glass like on the iPhone 6, instead of keeping the iPhone 5s' flatter, chamfered edges.
  • The phone's cameras will be upgraded to the cameras on the iPhone 6.
  • The phone will support Apple Pay and Live Photos.
  • Internals will likely be upgraded to Apple's A9 and M9 processors found in the iPhone 6s.
  • The phone will be available in multiple colors, including silver, space gray, and bright pink, according to Japanese website Mac Otakara (via MacRumors).

Why Apple's smaller iPhone is critical
With Apple's iPhone up only slightly last quarter, and with the company now guiding for a year-over-year decline in iPhone sales for its current quarter, a mid-cycle refresh of an older iPhone could serve to moderate that decline, or even help the tech giant grow sales. And given that Apple's iPhone segment is Apple's most profitable segment, a new iPhone -- even if it isn't a flagship iPhone -- will likely be accretive to earnings.

Furthermore, Apple has been very clear that even its older iPhones have been important to the company's results. Even during Apple's most recent quarter, Apple CEO Tim Cook explained how each of the past three generations of iPhones, the iPhone 6s, 6, and 5s lines, all play an important role for the company. And Cook specifically noted that the iPhone 5s was still selling well, perhaps alluding to the company's soon-to-launch revamped iPhone 5s.

Iphone

iPhone 5s. Image source: Apple.

iPhones are more important than ever to Apple's results. With iPhone revenue leaping higher in recent years, the segment is set to have the most positive or negative impact on Apple's overall business in the case of growth or contraction, respectively, compared to the impact any of Apple's other segments would have. In Apple's most recent quarter, Apple's iPhone segment accounted for 68% of total revenue, up from 56% of revenue in the same quarter two years ago.

The company is currently set to launch the smaller iPhone at an Apple event on March 15, along with with a rumored iPad Air 3, according to rumors from multiple media outlets with reliable track records for iDevice rumors.

Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends 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.