"iPhone Update Could Be Bigger Upgrade Than Expected"

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Photo: AP

Apple could be preparing a bigger than expected update for iPhone 5, both figuratively and literally, says Sterne Agee analyst Shawn Wu in a note this morning.The next iPhone will have “a slightly larger display” than current iPhones, says Wu.

He doesn’t really address how this would affect developers, current apps, or fragmentation. Wouldn’t a bigger screen cause a bunch of problems?

Here’s the two key points from Wu:

Checks Indicate iPhone Update Could Be Bigger Than Expected. Well, it turns out that we are picking up that this “interim” iPhone refresh in the Fall timeframe could be a bigger upgrade than we expected. We believe this keeps the iPhone fresh and competitive and helps maintain its leadership position. However, we continue to pick up indication that it will not likely incorporate 4G LTE due to battery life issues and spotty network coverage. And ironically, if anyone is in a position to fix these weaknesses, it would be AAPL.

Bigger Display. What is different is that in addition to a dual-core processor that we have talked about before, our supply chain sources indicate that it will sport a slightly larger display than the current 3.5-inch retina display that is already industry leading. We are picking up that it will retain a similar form factor and size but with thinner bezel. We believe this makes sense to improve the iPhone experience without making it too bulky as we have seen with models from competitors. We also want to highlight iOS 5 software features which we think are sizeable new upgrades including iCloud, Push Notification centre, iMessage, and Twitter integration.

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