Apple iPhone 7 is more than an 'incremental' upgrade

Apple iPhone 7 is more than an 'incremental' upgrade

The perfect storm for Apple: Strong pre-sales, problems for a competitor.

After being on a downward-sloping trend for more than a year, Apple has finally broken out. It traded up as much as 4 per cent today and 9 per cent this week.

At midday, Apple has already traded 60 million shares, more than twice its average in the past month for a full day.

If this keeps up, Apple will close at its highest level this year.

This rally is about more than just the problems its competitor Samsung is having with the Galaxy Note 7 phone.

Sure, Samsung's woes are helping Apple. Samsung is down nearly 6 per cent this month, since it announced a recall of the Galaxy Note 7 phone. Could it get worse for Samsung? First, the Federal Aviation Administration (FAA) warned against using the phone on planes. This morning, New York's Metropolitan Transit Authority (MTA) told commuters not to use the phone on the subway. Or even in the subway station.

Yikes!

But give Apple some credit. Apple is the company no one had anything good to say about. Incremental changes in the phone were not what people wanted. And get rid of the headphone jack? What an outrage!

Turns out it might not be such an outrage. Reviews of the iPhone 7, while not ecstatic, are at least respectful, and a small handful have heartily endorsed the changes.

Turns out some people like these changes. Ditching the jack freezes up space for a battery with a longer life, and you can still plug in your wireless headphones through the Lightning port. And it's water-resistant! And the dual-lens camera with 2x optical zoom? How many lousy low-light photos have you taken? That's about to go away.

This is a lot more than just an"incremental" upgrade.

Most vendors have indicated that pre-orders have been much stronger than expected. The iPhone 7 goes on sale this Friday, but yesterday T-Mobile CEO John Legere said pre-sales were four times bigger than they were for the iPhone 6. Sprint also made similar comments, saying sales were up 375 per cent over the same period last year.

Apple's shares did dip slightly midday as Verizon EVP Marni Walden, speaking at a Bank of America Media, Communications and Entertainment Conference, said that iPhone preorder volume is actually within normal range.

Since Apple will not be releasing its first weekend sales, this may be all we have to go on for the moment. And remember, they are launching the phone in 25 countries.

Will any of this make a difference?

Piper Jaffray estimates that Apple's iPhone revenues will increase 11 per cent due to the iPhone 7 upgrade. That is substantial, given the iPhone is 66 per cent of Apple's revenues. Will Apple increase its share of the market? Right now, Apple has about 17 per cent of the global smartphone market.

It's not clear that their share will be increasing dramatically, but one thing seems obvious: Judging by pre-orders, their share will certainly not be dropping.

Like most Apple aficionados, I wasn't feeling particularly compelled to ditch my iPhone 6 prior to the release. But a couple more hours of battery life, with water resistance, coupled with a notable improvement in the ability to take pictures in low-light (the bane of cellphone photographers)?

That's a compelling proposition.

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