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Analyst Blog

(Editor's note: This original article was published on Zacks.com Sept. 13, 2012.)

After a prolonged wait, Apple Inc. (AAPL - Analyst Report) has finally brought its iPhone 5. The latest version of iPhone is much thinner and lighter than its predecessors. The iPhone 5 is powered by Apple’s new A6 processor chips and runs on iOS 6, ensuring faster processing speeds.

As expected, iPhone 5 supports 4GLTE and DC-HSDPA wireless connectivity that provides faster speeds for browsing, downloading and streaming content over the Internet. The iPhone 5 will be available on AT&T Inc. (T), Sprint Nextel Corp. (S) and Verizon Communications Inc. (VZ) networks.

With a weight of 3.95 oz, iPhone 5 is much lighter than its predecessors - iPhone 4S (4.9 oz) and iPhone 4 (4.8 oz). Moreover, the new iPhone is 18% slimmer than the earlier version with its 7.9 mm anodized aluminum body. In terms of screen size, iPhone 5 has a 4-inch 1136-by-640 Retina display, which is bigger and has a better resolution than iPhone 4S and iPhone 4, which had a 3.5-inch 960-by-640 Retina display.

Though Apple has not altered the 8 mega pixel rear camera in iPhone 5, the front camera is upgraded from VGA to much improved 1.2 mega pixel with 720p video. iPhone 5’s Siri has new features and supports more languages.

Apart from these, iPhone 5 has a new connector called Lightning, an upgraded version from the earlier 30-pin connector. However, customers would have to buy new accessories to use the iPhone 5. Moreover, Apple has upgraded its standard Apple Earphones to Apple EarPods. EarPods are small earbuds with built-in remote and mic.

iPhone 5 is available in white and sliver or black and slate colors. Customers can preorder their iPhone 5 from September 14, 2012 and will have to shell out $199 for the 16GB model, $299 for the 32GB model and $399 for the 64GB model in the U.S. The phone will be available in the U.S., Australia, Canada, France, Germany, Hong Kong, Japan, Singapore and the U.K. starting September 21, 2012. iPhone 5 will be available in 22 more countries from September 28, 2012.

We note that several new features of iPhone 5 are already present in some of the smartphones available in the market. However, considering the loyal customer base and international expansion plans, we remain optimistic about Apple’s long-term growth. iPhones constitute a significant portion of Apple’s revenues and we believe that the performance of iPhone 5 will act as a major catalyst for the company’s forthcoming quarters.

We believe that the new iPhone could strengthen Apple’s position in the smartphone market. According to IDC, in the second quarter of 2012, Apple’s share in the smartphone market slid to 16.9% from 18.8% in the year-ago quarter. Over the same period, Samsung almost doubled its market share to 32.6% from 17.0%. The new iPhone 5 will definitely increase the Apple’s chances to regain some lost ground.

However, the impending lawsuits and stiff competition from Samsung with its wide range of products in the smartphone and tablet markets will remain an overhang on the stock going forward.

We have a Neutral recommendation over the long term (6-12 months). Currently, Apple has a Zacks #3 Rank, which implies a Hold rating in the near term.

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