Was Apple caught off guard by the rise of phablets?

Posted by Shane McGlaun

Smartphone users continue to clamor for larger screens, faster performance and more storage. Device makers are obliging popular demand by stepping up to the plate and offering what appears to be ever-increasing screen sizes along with improved specs.

Indeed, displays have become so big on certain smartphone devices that they are skirting the gap between a traditional handsets and tablets, earning the apt "phablet" label.

Apple certainly has sold a huge number of its new iPhone 5 handsets. However, the new iPhone 5 clearly failed to create the same sort of buzz in the smartphone market that some of the previous iPhone devices made. According to UBS analyst Steve Milunovich, part of the reason why the iPhone 5 hasn't been as popular as previous iterations can be attributed to consumer disappointment over the screen size.

He believes that an iPhone with a four-inch display simply isn't enough for people to get excited about when competitors such as Samsung are launching smartphones with six-inch screens stretching into the phablet range.

“The data tell you the iPhone 5 is not a killer product,” Milunovich writes. “I think they need to offer new services, and hopefully integrate new fingerprint technology. There’s not going to be any excitement in this quarter… I think they got surprised by the interest in 5-inch phablets. I think they were caught flat-footed, and it’s going to be a while before they respond. Remember, these are 15-month to 18-month design cycles. A new iOS 7 design, under Jonny Ive’s direction, will be coming this summer, but I’m not sure it’s enough to get people excited.”

While the analyst believes Apple was caught flat-footed when it comes to the phablet market, he still emphasizes that Apple stock is worth buying. He also believes the iPhone 5 has room to grow before the next generation smartphone launches from Apple. Frankly, it's very curious that the iPhone is so incredibly popular, yet in some circles the iPhone 5 is viewed as something of a disappointment.