Larger iPhone 6 May Cause Massive Spike in Upgrades, Lure Android Users

Apple's upcoming iPhone 6 is widely rumored to include a larger display, which could encourage a significant number of users to upgrade in 2014, according to analyst Brian Marshall of ISI Group, who released a note to investors today.

Echoing past iPhone 6 rumors, Marshall suggests Apple will release two versions of the phone, one with a 4.7-inch screen and one with a 5.5-inch screen. The launch of two phones, both of which offer a total redesign of the existing 4-inch iPhone 5s, could spark a massive upgrade cycle.

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Apple's current installed base is estimated to be at 260 million users, and ISI Group calculates that half of today's iPhone purchases are made by upgraders, users who are upgrading their iPhones from an existing iPhone to a new version of the product.

ISI indicates that while the upgrade rate (percentage of installed base upgrading devices in a given quarter) was at 10 to 11 percent in 2011–2012, it has now dropped to approximately 9 percent because users have fewer reasons to upgrade with the iPhone 5c and 5s not introducing any significant design changes.

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Peak quarters have seen upgrade rates of 12 to 14 percent, and ISI expects a similar upgrade rate during the second half of 2014 when the iPhone 6 is launched, resulting in a higher number of sales. An iPhone 6 with an increased screen size may also lure customers who have switched to Android from the iPhone because of the latter's lack of a large display.
"Large-screen envy" is prevalent among the iPhone installed base and we believe a ~5” form-factor iPhone would spark a massive upgrade cycle as well as many "Android switchers" returning back to the iPhone (we refer to this as the “mother lode” of all Apple upgrade cycles).
Citing both "large-screen envy" and "pent-up demand" ISI Group suggests the new iPhone 6 models could result in an extra $3.00 earnings per share following release in the second half of 2014.

Higher demand for an iPhone during a redesign year is not unreasonable, as it has now been two years since the 2012 introduction of the iPhone 5. While the iPhone 5s included multiple internal improvements and the Touch ID fingerprint sensor, it retained the same 4-inch display and design of the iPhone 5, as did the iPhone 5c, which was just a repackaging of the existing model.

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iOS 7.1 Makes the iPhone 4 Snappier

Last September, when Apple released iOS 7 to the public, the iPhone 4 was the oldest model supported by the operating system. However, many iPhone 4 users found their devices to be slow and unresponsive, something Apple was likely aware of because there were a number of iOS 7 features that didn't work at all on the iPhone 4, including Siri, AirDrop, AirPlay Mirroring, and a number of special effects across the user interface including parallax, some translucency effects, and live wallpapers.

Today, with the release of iOS 7.1, Apple has much improved the experience of iPhone 4 users on iOS 7, though not entirely back to what users saw in iOS 6.1.3. According to Ars Technica, there is a measurable improvement in iOS 7.1 across a number of native iOS apps, including the speed at which the apps open from the home screen:

iOS 7.1 Improvements
There's a measurable improvement over iOS 7.0 across all of these apps, some more noticeable than others. In a few instances, iOS 7.1 very nearly catches up with iOS 6.1.3, which is impressive given the gap between the two operating systems in some of these apps. It's not a complete recovery from the original iOS 7.0 release, but it's about as good as Apple can do with hardware this old. The small speed improvements are present throughout the operating system, and this makes the iPhone 4 feel more responsive than it did, if not always as responsive as it once was.

iOS 7.1 also helps with the UI jerkiness that was all over the place in 7.0. It's easiest to capture the difference in video—actions like launching apps or pulling up the Control Center shade are always visibly jerky in iOS 7.0, but they're smooth (or at least smoother) in the new update.
As Ars notes, iOS 7.1 may well be the final major iOS release for the iPhone 4, as Apple generally removes support for the last generation of iPhones when it releases a new operating system each year. Ars says iOS 7.1 makes the experience good enough that using the iPhone 4 is no longer "unbearable", but that there are "unmistakable" benefits to moving to a faster phone.

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