Apple reportedly ‘caught flat-footed’ by the rise of phablets

The iPhone 5 has certainly been a hit but it doesn’t seem to have been the record-breaking, world-conquering hit that previous iPhone models have been. Part of this has been because many customers are still picking up older iPhone 4 and iPhone 4S models at reduced prices. And per Barron’s, UBS analyst Steve Milunovich thinks that part of the reason iPhone 5 sales have been “disappointing” is because an iPhone with a larger 4-inch display simply isn’t enough to get people excited in an era when Samsung is releasing phablets whose displays top 6 inches.

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“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.”

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But despite citing these challenges in the phablet market, Milunovich remains bullish on Apple overall and rates the stock a Buy with a $560 price target. Milunovich also thinks that the iPhone 5 still has room to grow before the next-generation iPhone comes out, although he notes that the migration to its newest smartphone has been going more slowly than many at Apple had hoped — even though it’s the best-selling smartphone on the planet.

This article was originally published on BGR.com