Apple’s (AAPL) new iPhones faced a couple of hiccups within days of a blockbuster debut. Apple’s updated iOS 8.0.1 reportedly disabled cellular services and access to TouchID fingerprint scanner. Some users reported bugs in the updated OS that make keyboards disappear suddenly.
Apple has already pulled out the update and stated that a new iOS 8.0.2 version will be available within the next few days. In the meantime, the company asked the affected users to reinstall iOS 8 using an updated version of iTunes. However, Apple’s health app will not work after the reinstallation.
Some users also complained that their iPhones, especially the bigger iPhone 6 plus, bend somewhat under pressure. Apple indicated that customers facing from this problem will receive a replacement for their devices, if the phone passes official visual mechanical inspection.
Per Apple, if the phone bends under normal use, as under the guidelines of the test, the customer will get a replacement device for free. Otherwise, the customer will have to pay to get a replacement.
Although these incidents tarnish Apple’s reputation, we believe that they will not hurt iPhone sales, going forward. These incidents are not also expected to hurt share price, which declined marginally (0.87%) to close at $101.75 on Sep 24, 2014.
Apple unveiled the two devices at an event on Sep 9. The company along with carriers AT&T (T), Sprint, T-Mobile and Verizon Wireless — and authorized retailers — Best Buy, Target and Wal-Mart (WMT) — started selling the devices from Sep 19. Apple created a new record after it sold more than 10 million units of the devices in the very first weekend.
iPhone contributes a significant portion of Apple’s top line. The bigger screen brings iPhone at par with many phablets available in the market from the likes of Samsung, HTC and LG, which improves Apple’s competitive position.
According to a survey by Boston-based Gazelle Inc., a third of Google’s (GOOGL) Android users are expected to shift to iPhone 6. The user number is up from a 10th a year ago, when Apple shipped iPhone 5S and 5C.
Per SquareTrade, a company that provides extended protection plans, Apple’s new iPhones are much more durable than iPhone 5S and 5C and Samsung Galaxy S5. However, the bending problem certainly puts this observation under the scanner, in our view.
Nevertheless, we believe that pent-up demand for the all-new iPhones will be the key growth catalyst for Apple over the next 12 months. We also note that the company is yet to launch the new iPhones in its fastest growing market — China. We believe that a China launch in late 2014 will significantly boost Apple’s top line and profitability for fiscal 2015.
Currently, Apple has a Zacks Rank #2 (Buy).
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