Why Apple Inc. Should Just Say "No" to an iPhone Mini

By Markets Fool.com

If there's one thing you can count on from Apple , it's rumors. There's never a shortage of industry pundits quoting the infamous "anonymous" source claiming the iEverything maker is working on its next big thing. According to that same rumor mill, Apple's next big thing may not be big at all -- in fact, if the scuttlebutt proves true, it's moving in the complete opposite direction and is planning to release a smaller, lower-end smartphone dubbed the iPhone 6s Mini.

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If it comes to fruition, as an analyst from Cowen and Company suggests, Apple's new entry in the smartphone wars will sport a modest four-inch screen. By comparison, the iPhone 6 and 6 Plus, Apple's most recent introductions, have 4.7 inch and 5.5 inch screens, respectively. To be sure, there are no shortage of folks dismissing the notion that Apple is going small, let alone offering consumers what amounts to a low-end smartphone alternative. For iFans, let's hope the iPhone 6s Mini naysayers prove correct, because based on recent data, smaller is not better.

What we learned from the holidays
As is the case most holiday seasons, mobile devices flew off the shelves in December 2014, led by Apple's new iPhone 6 and iPhone 6 Plus, according to a recent report. The week leading up to Christmas was a boon for device manufacturers, and Apple enjoyed a whopping 51.3% share of all smart device activations during that period.

Samsung, which coincidentally enough introduced its own lineup of small-screen, entry-level smartphones last year, came in a distant second with 17.7% of all holiday season activations. Though well behind Apple and Samsung, Microsoft via its new-ish Nokia acquisition, accounted for a respectable 5.8% share -- not a poor showing from the underdog.

With its new smartphones combined with some of the hiccups Samsung has experienced as of late, Apple's dominant holiday sales results aren't surprising. But what may come as a bit of shock and should directly impact Apple's decision to follow Samsung and Microsoft into the small-screen, lower-end smartphone market, is what drove the company's stellar results: its iPhone 6 Plus. The 5.5 inch screen was a hit with holiday shoppers, and the overall phablet category easily outperformed other devices as measured by year-over-year growth.

The consumer has spoken: bigger is better
Research firm IDC has long predicted the growth of phablets as consumers increasingly turn to their smartphone for their tech-related needs. This year, phablets -- smartphones with screen sizes between 5.5 inches and 7 inches -- are expected to outsell tablets by nearly 100 million units. This brings us back to the holiday sales results and rumors of Apple's return to a smaller smartphone.

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Medium-sized phones led holiday sales with 64% of device activations, but that is down from 65% last year.Small screen phone sales fell further from last year's already paltry 3% holiday market share to just 2%. Tablet sales also took it on the chin, dropping from 29% to 22%. It's clear that consumers are going straight to the phablet shelf instead.

In the week leading up to Christmas 2013, just 4% of shoppers that bought a smart device for the holidays opted for a phablet. This past Christmas? A whopping 13% of all activations -- a more than three-fold increase from last year -- were phablets, and that rapid growth is expected to continue.

Following Samsung and re-entering the smaller screen smartphone market with the rumored iPhone 6s Mini may or may not come to pass. But for Apple shareholder's sake, opportunities for growth clearly lie with larger devices. Apple just took two steps forward with its newest, large screen smartphones, and it makes little sense to take one step back with aniPhone 6s Mini.

The article Why Apple Inc. Should Just Say "No" to an iPhone Mini originally appeared on Fool.com.

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.