Apple Inc. (AAPL)’s iPhone, Not iPad, Will Be Key Catalyst

iPhone will remain king
While the iPad’s growth is probably peaking, the iPhone appears to have already exited its high-growth phase. However, as I have written previously, I expect Apple Inc. (NASDAQ:AAPL) to introduce a cheaper iPhone priced at $329 or $349 (unsubsidized) within the next year or so. This could have the same effect on iPhone sales that the iPad Mini had on iPad sales. There are many people who would pay a premium for an iPhone but cannot afford $450 or more for a phone, and therefore turn to cheap Android phones instead. Narrowing the price gap would allow Apple to compete for these customers. For example, a recent “trade-in” promotion in India that lowered the cost of an iPhone 4 from approximately $485 to $360 tripled the sales rate in one week.

Lastly, there are still a few major wireless carriers that have not yet begun offering the iPhone, most notably China Mobile Ltd. (ADR) (NYSE:CHL). Even T-Mobile USA just introduced the iPhone this month. The iPhone’s slowing growth rate is partially attributable to the lack of major carrier partner additions in the last year. However, it is virtually inevitable that Apple will eventually partner with China Mobile Ltd. (ADR) (NYSE:CHL) and other major carriers that do not have the iPhone yet. The combination of a cheaper iPhone and broader distribution will reenergize iPhone sales. In fact, IDC projects a 19% compound annual growth rate through 2016 for the iPhone, meaning that it will actually gain ground on the iPad in the next few years.

Foolish conclusion
The iPhone and iPad are both wonderful products for consumers and for Apple Inc. (NASDAQ:AAPL) shareholders. However, the iPhone is already the dominant product in terms of revenue and profit, and this is unlikely to change anytime soon. While the iPad is not likely to get much cheaper, the iPhone is ripe for a price drop today, which could stimulate significant demand in developing countries. The addition of new iPhone carrier partners will put even more distance between the iPhone and the iPad. In short, the iPhone is the product most likely to lead Apple’s next wave of growth.

The article The iPhone — Not iPad — Will Be Apple’s Big Growth Driver originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg owns shares of Apple. Adam Levine-Weinberg is short shares of Amazon.com. The Motley Fool recommends Amazon.com, Apple, and Google. The Motley Fool owns shares of Amazon.com, Apple, China Mobile, and Google.

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