Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Apple Inc. (AAPL): The Rise of the Phablets!

Asian rivals, such as Asus, HTC and ZTE, have been eager to catch up to Samsung, which accounted for three quarters of all phablet shipments last year, according to Barclays. This means that Apple Inc. (NASDAQ:AAPL) could be left in the dust, as it faces a new form factor that makes its iPhones look even more outdated.

However, I believe that market pressure will eventually force Apple Inc. (NASDAQ:AAPL) to release a phablet of its own. Apple eventually bowed to pressure from Amazon.com, Inc. (NASDAQ:AMZN)’s Kindle Fire and Google’s Nexus 7-inch tablets by creating the iPad Mini. Releasing a phablet, however, would be a tricky move which could cannibalize both iPad and iPhone sales, which respectively comprised 56% and 20% of its top line last quarter.

A “phabulous” fad or a new trend?

Although many investors still dismiss phablets as a fad, there are several positive catalysts that could make Barclays’ optimistic projections a reality.

First of all, consumers now use messaging services (WhatsApp, Viber, Line) more than traditional voice calls, which has changed the way consumers interact with their mobile devices. Mobile devices are now used more for web browsing, media consumption and games – which all require larger screens.

Second, customers in emerging markets such as India prefer purchasing a single device to fulfill the role of a tablet and a phone, and phablets fit the bill nicely. With a Bluetooth keyboard, they can even be used as ultra-portable PCs. Only using a single connected device at home and on the go can also reduce Internet costs by eliminating the need for a broadband connection at home. With the arrival of 4G networks and wireless tethering, phablets could eventually replace broadband modems altogether.

The Foolish Bottom Line

I believe that the current popularity of phablets is a long-term trend that will cause demand for smaller smartphones to plummet over the next few years. Many tech journalists have mocked phablets by showing how silly it looks to hold up an iPad Mini to the ear. However, they tend to ignore the fact that smartphones are now less phone and more computer than ever before, and users will favor a better experience with the latter over the former.

Therefore, I believe that it would be foolish for investors to dismiss phablets as another passing trend, or doomed to failure like netbooks, as some writers have claimed. Samsung’s numbers speak for themselves, and Apple Inc. (NASDAQ:AAPL) should pay close attention if it doesn’t want to get left behind again.

Leo Sun owns shares of Apple and Nokia Corporation (ADR) (NYSE:NOK). The Motley Fool recommends Apple. The Motley Fool owns shares of Apple Inc. (NASDAQ:AAPL).

The article The Rise of the Phablets! originally appeared on Fool.com.

Leo is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.