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The iPhone That Created Apple's Latest Headache

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Apple's recent results have been portrayed as bad news by many. Revenue failed to meet targets, targets for the next quarter have been lowered, and iPhone sales dropped to less than one percent year on year growth, compared to almost fifty percent this time last year.

If you want to know what is to blame, look no further than the iPhone 6.

Apple iPhone 6 (image: Ewan Spence)

Not because the iPhone 6 did anything wrong, but because the iPhone 6 (with some help from the iPhone 6S) was such a strong seller that it pushed the sales of the smartphone far higher than many predicted. There was a rush towards the larger screened handsets, and that resulting spike in sales reflects not just those ready to upgrade because mobile phone contracts were coming to an end, but those who were waiting for a larger-screened iPhone did not hesitate and upgraded immediately.

The demand for a larger screened iPhone was comfortably served by the iPhone 6 and iPhone 6 Plus, with a result that there was far less demand for the iterative iPhone 6S and 6S Plus handsets.

Before the release of the iPhone 6, analysts were expecting the quarter just past to see sales of around 65 to 70 million iPhones. In real life the iPhone 6 spiked those numbers to 74 million in 2014's final calendar quarter, and carried forward that success to achieving 75 million in the same period for 2015. Apple front-loaded the sales success of the larger devices, and now the media is panicking because it can only see the back-end of the sales curve.

The question now is what happens to the huge volume of users of the iPhone 4S, iPhone 5, and iPhone 5S handsets who are more than happy with a four-inch screened smartphone and decided not to upgrade. If you believe the leaks (or if you assume Taniyama-Shimura), Apple is ready to offer them an updated smaller smartphone. The iPhone 5SE announcement is expected to take place in March ahead of arriving  in retail stores during April.

Is the offer of the iPhone 5SE enough to update the stubbornly smaller focused user base? If it is, Apple's sales figures should rise to satisfy the financial markets and Tim Cook will have taken another step to spread the iPhone sales across the four quarters, rather than clumping everything in a big spike after September each year.

If not, Apple can console itself that its 1 percent rise in unit sales still outpaces Samsung's 7.6 percent drop,  Apple just delivered the biggest quarterly profit of a public company in history, and the iPhone 6 remains one of the best-selling smartphones on the planet.

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