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Even an iPhone 7 Fail Can’t Ruin Apple Inc. (AAPL)’s Winning Run

Apple Inc. (NASADAQ:AAPL)

Apple Inc. will probably announce the iPhone 7 next week, and will likely begin selling the iPhone 7 on September 16. Many are concerned about the smartphone being not good enough to drive sales and upgrades, or that users will have to wait another complete year for the iPhone 8 – expected to be on the 10th anniversary of iPhone.

The first iPhone sales started on June 29, 2007, and the 10th anniversary will be in 2017. So, many are hoping for an iPhone 8 to be a much better upgrade. However, even with low expectations surrounding the iPhone 7, one thing that is “probably not going to change very much is Apple capturing the vast majority of smartphone profits,” says Chuck Jones of Forbes.

Apple Inc.

Apple to continue to reap profits

Apple Inc. netted 61% of the profits of the smartphone market in calendar 2013, 80% next year (2014) and 91% in 2015 (the year the iPhone 6 and 6 Plus came out), estimates Michael Walkley at Canaccord Genuity. However, for the March quarter this year, it was 84% while for the June 2016 quarter, it fell to 75%. However, Walkley estimates that during this three and a half year time-period, the operating margin of the iPhone has held quite steady between 35% – 40%.

Even the iPhone SE, which became available in the June quarter, didn’t had much impact.  Luca Maestri – Apple’s Chief financing officer – said on the June quarter conference call, “From a gross margin perspective, it is slightly dilutive to company margins, but the impact is not particularly large.” Jones expects Apple to continue to capture the major part of smartphone profits because brand loyalty is a major reason why users will stay with it.

Samsung appears to be the only other company to generate any profits. As per Walkley’s estimates, in 2013, the Korean smartphone maker enjoyed 43% of the smartphones market’s profits, which declined to 14% to 2015 and hiked to 22% in the March 2016 quarter and 31% in the June quarter. As for other vendors – BlackBerry, Lenovo/Motorola, Microsoft, LG, TCL, Microsoft, HTC and Sony – none were able to generate any profit over the past three and a half years.

What the invitation hints?

Apple Inc. will probably unveil its next-gen iPhone next week. Generally, it is very quiet about the details of the product before its launch. However, this time, the invitations sent by the tech company contain not-so-subtle hints to at least one amazing new feature, notes a separate report from Forbes.

The invitation consists of a simple multi-colored photo, with a message, “See you on the 7th.” But that kind of multicolored image is impossible to create with an iPhone unless it is fitted with a radical new camera. For long, the iPhone 7 has been rumored to come packed with a brand new dual-lens camera. The dual-lens camera system could be used to improve smartphone photography in many ways.

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Aman is MBA (Finance) with an experience on both marketing and Finance side. He has work as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, playing PC games and cricket.