Not Seeing a Play on the iPhone 6

 | Aug 07, 2014 | 12:00 PM EDT
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I always hesitate, as a macro thinker, to wander into a debate about the new Apple (AAPL) iPhone, because there are a lot of people who know a lot more than I do about the technical specifications, inner workings and hidden mechanisms of this thing. But an outside perspective is always good. 

I remember, a long time ago, when the first iPhone was released. It is the stuff of legend. What was so different about the iPhone compared with, say, the BlackBerry (BBRY)? They are both phones. They are both computers. What was different about the iPhone was its operating system. For the first time in history, people had a way to operate a computer the way humans have always wanted to operate a computer: by touching stuff on the screen. The combination of the touchscreen technology and, more importantly, the operating system, meant that you could easily operate this very powerful computer in the palm of your hand.

So many years and many iterations later (eight, in fact), there are lots of rumors swirling around about the iPhone 6. If you recall what happened with the iPhone 5, it was probably the biggest technology release since Windows 95, and it had a similar effect on the stock: It marked the top in Apple for a long time. Until today, in fact.

The device market moves at the speed of light, and things have changed since the iPhone 5. People have expressed a desire for bigger devices, with bigger screens, so they can, I don't know, watch movies? This is all academic for me -- I have no desire to watch movies on a phone, and I like stuff that fits in my pocket. But there is a whole universe of people who like the Galaxy S4, with the big screen, and even more people who like something called a "phablet," a phone-tablet hybrid. For years, phones got smaller and smaller, and now, it seems, they are getting bigger. And the research I have done seems to indicate that this is the direction that Apple is going.

So this is a big change in strategy, no? A bigger iPhone? What if people don't like it? One failed product launch could mean [throat-cutting motion] for Apple.

Or is that really true?

Take a few steps back. Why is the iPhone successful? Because of the look and feel, the user experience -- most of all, the operating system. iOS is what makes it successful. Pretty much every other device operating system rips off Apple's in one way or another. It's like how the Mac got started, by Steve Jobs taking a trip to Xerox PARC. Phone bigger, phone smaller, better camera, worse camera, unbreakable screen, whatever, these are all details. Apple is unlikely to lose (or gain) market share on the basis of fiddling with the handset (even if they are big fiddles).

What is more likely is that, going forward, you will have Apple people and Samsung people, and that will be that. A duopoly. Do you think Coke and Pepsi are locked in mortal combat, each trying to put the other out of business? McDonald's and Burger King? No. Apple and Samsung will probably coexist for years, unless one of them makes a serious innovation or tactical error. It's actually unwise to try and get 100% market share. When companies try to do it, they tend to experience some rather nasty unintended consequences (see Microsoft (MSFT), 15 years ago).

So the only way Apple stock will go appreciably higher is if there is a significant multiple expansion. That could happen, I suppose, but that's a different thesis from saying, "I think the iPhone 6 is going to be a big hit/miss." I know it's the stock that everyone loves to trade, but I really don't think there's anything to do here. In the whole investment universe, there has to be something else out there with a bigger opportunity to be right -- or wrong.

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