Apple Chief Executive Tim Cook was already crowing about users switching from Android to Apple before Samsung’s Note 7 issues.
Shares of Apple Inc. hit their highest prices of 2016 on Tuesday as Samsung Electronics Co. Ltd.’s exploding-phone saga worsened and one analyst said Apple could sell millions of iPhones because of it.
Samsung 005930, -8.04% announced Monday afternoon that any Galaxy Note 7 devices that have been sold should be turned off, and said it was halting sales of the smartphone after replacements suffered a similar overheating issue to the original devices. Samsung had already decided to stop production of its Note 7 smartphone after several more phones caught fire over the weekend, telling MarketWatch that it was “temporarily adjusting the Galaxy Note 7 production schedule in order to take further steps to ensure quality and safety manners.” It took that a step further on Tuesday morning, announcing that it has decided to stop production altogether “for the benefit of consumers’ safety.”
The company issued a global recall of the phone in early September, roughly a month after introducing it, due to a number of incidents in which the phone unexpectedly exploded. Samsung replaced the first batch of phones with new ones, but the problem has seemingly persisted even in replacement models, including last week when one of the newly-issued phones caught fire on a Southwest Airlines plane.
The saga might be a boon to iPhone sales in an otherwise slower-than-normal year for Apple AAPL, +0.03% In a Monday note to clients issued before Samsung completely halted sales, CFRA Research analyst Angelo Zino said he expects the Note 7 issues to help drive some Android users over to iOS, which he estimates could help increase Apple’s share of the global smartphone market by 1%. Samsung had a 22.4% share of the market in the second quarter, double Apple’s share, which was 11.8%, according to industry tracker IDC.
Zino said a 1% share gain would help Apple sell an additional 14 million to 15 million units during the September quarter, which would mean a 7% increase from the analyst’s previous sales forecast. Analysts on average are calling for September-quarter iPhone sales of 45 million, down from 48 million a year ago, according to FactSet. Apple’s iPhone revenues are forecast to come in around $27.6 billion, compared with $32.2 billion in the year-earlier period. However, that could be higher if Zino’s prediction comes true regarding the increasing rate of switchers and share gains.
“The biggest U.S. carriers have also stopped selling Note 7 phones and will allow customers to replace with a different device,” he said. “We see a more favorable competitive landscape and higher Android switcher rates for Apple over the next 12-18 months.”
Zino also expects the Note 7 to dampen future Samsung product launches.
Customers switching to iOS from Alphabet Inc.’s GOOGL, -0.56% GOOG, -0.37% Android operating system represent an opportunity for Apple to drive top-line revenue despite iPhone saturation in developed markets, which has caused Apple’s smartphone sales to dip the past two consecutive quarters. Analysts are anticipating Apple’s first-ever year-over-year annual decline in iPhone sales this year, with the current FactSet consensus calling for 211 million iPhones sold, compared with 231 million last year.
However, switchers accounted for the highest percentage of quarterly iPhone salesin the company’s history last quarter, Apple said, helping it to narrowly surpass quarterly revenue expectations for the June quarter. The company’s next earnings report, which will include September sales of the iPhone, will be released on Oct. 25.
“Switchers and first-time smartphone buyers represented the lion’s share of our iPhone sales in the quarter,” Apple CEO Tim Cook said on a call with analysts in July.
Shares of Apple rose 1.7% to close Monday at a 10-month high of $116.05, pushing them up 20% in the past three months. They have vastly outperformed the Dow Jones Industrial Average DJIA, -1.09% which includes Apple, as the blue-chip index is up less than 1% in that time period.
By Jennifer Booton
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