Apple Q4 2013 earnings: 33.8M iPhones, 14.1M iPads, $37.5B revenue!

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As expected, Apple is out with its financial report for Q4 this afternoon. It’s an important one, as the company began selling two new handsets simultaneously last month, and Wall Street is dying to know how the strategy is working thus far.

Well, so far so good. Apple announced today that during its fourth quarter of 2013, it sold 33.8 million iPhones, beating Wall Street expectations of 31 million. It also sold 14.1 million iPads and garnered $37 billion in revenue. More after the fold…

Here is the full breakdown:

  • Revenue: $37.5 billion
  • EPS: $8.26
  • iPhones: 33.8 million units
  • iPads: 14.1 million
  • Mac: 4.6 million units

And here are some comments from CEO Tim Cook and CFO Peter Oppenheimer:

“We’re pleased to report a strong finish to an amazing year with record fourth quarter revenue, including sales of almost 34 million iPhones,” said Tim Cook, Apple’s CEO. “We’re excited to go into the holidays with our new iPhone 5c and iPhone 5s, iOS 7, the new iPad mini with Retina Display and the incredibly thin and light iPad Air, new MacBook Pros, the radical new Mac Pro, OS X Mavericks and the next generation iWork and iLife apps for OS X and iOS.”

“We generated $9.9 billion in cash flow from operations and returned an additional $7.8 billion in cash to shareholders through dividends and share repurchases during the September quarter, bringing cumulative payments under our capital return program to $36 billion,” said Peter Oppenheimer, Apple’s CFO.”

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Apple’s earnings call will start in just a few minutes. If you’d like, you can listen to a live webcast of the call via the the investors portal. Or, as usual, you can check back with iDB later this afternoon for commentary and major announcements.

Apple announces record 9 million iPhone sales over first three days, 200 million iOS 7 updates

Apple has just announced first-weekend sales figures for the iPhone 5s and 5c. Sales for both phones total 9 million. In comparison, the iPhone 5 shipments topped 5 million in the same period. These numbers come in at the higher end of analyst estimates, with many predicting bearish sales similar to the iPhone 5 launch last year. As expected, Apple did not reveal the breakdown of sales between the different iPhone models.

Alongside phone sales, the company’s press release also highlights iOS 7′s successful launch. Apple has announced that 200 million devices have been updated to iOS 7 since it was released last Wednesday. This is double the rate at which iOS 6 was adopted.

“This is our best iPhone launch yet―more than nine million new iPhones sold―a new record for first weekend sales,” said Tim Cook, Apple’s CEO. “The demand for the new iPhones has been incredible, and while we’ve sold out of our initial supply of iPhone 5s, stores continue to receive new iPhone shipments regularly. We appreciate everyone’s patience and are working hard to build enough new iPhones for everyone.”

Apple says that demand for the 5s has exceeded  supply and is working to get “new iPhones for everyone”.  Off the back of these strong sales, Apple has now informed investors (through their 8-K filing) that gross margin is expected to hit in the higher end of their predicted range for this quarter, at around 37%. In addition, Apple expects revenue to reach the higher end of their estimated range of $34 – $37 billion dollars.

In addition to iPhone sales, Apple also commented on iTunes Radio.

Over 11 million unique listeners have already tuned in to iTunes Radio since launch with the most listened to song being “Hold On, We’re Going Home” by Drake.

Despite being only available in the US at the moment, iTunes Radio seems to have been received well by users, with Apple reporting 11 million unique listeners to date.

Nearly one-third of iOS users upgraded to iOS 7 in the first 16 hours!

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Adoption of Apple’s new version of iOS is off to a fast start. Nearly a third of iOS device owners have already upgraded to iOS 7 just 16 hours after the software was released. According to Mixpanel, by Thursday at 10:28am ET some 31.8 percent of iPhones, iPads and iPods had adopted the new operating system, noted for its flat design and a number of new features. Apple officially released the software on Wednesday at 1pm ET…

The Mixpanel announcement can be found here.

Go here for the interactive chart of iOS 7 adoption

By comparison, 24 hours after iOS 6 was released just fifteen percent of iOS device owners had adopted the new OS. Rival platform Android is saddled with a reputation of being fragmented due to the slow pace of OS adoption.

Compare this to Google’s most recent snapshot of Android OS version distribution.

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As you can see, less than half of Android devices (or 45.1 percent) were on Android Jelly Bean version 4.1.x or 4.2.x, per data collected during a seven-day period ending on September 4, 2013.

Keep in mind that Jelly Bean was released alongside Google’s Nexus 7 tablet in June 0f 2012. Also important: Google’s data only counts Android devices that access its Play store, excluding gizmos that use forked Android version such as Amazon’s Kindle Fire tablets and no-name Chinese cheapos.

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In this week’s Bloomberg Businessweek cover story, Apple CEO Tim Cook mentioned both a NetAppliations survey that gave iOS devices a 55 percent share of all mobile web activity and an IBM research note saying iPads accounted for more than 88 percent of online shopping traffic from tablets during last Black Friday:

“For us, it matters that people use our products,” he said

And commenting on the widespread Google fragmentation, Cook said:

It will show up in developers. It will show up for people that no longer have access to certain apps. It will show up in security issues because if you’re not moving your customer base to the latest version, then you have to go back and plug holes in all of this old stuff, and people don’t really do that to a great degree.

Indeed, for developers, the solid support of iOS 7 means they can be assured apps written for the latest version of Apple’s mobile OS will be widely installed. While the vast majority of Apple’s user base quickly adopts the latest and greatest version of iOS, some people still use older hardware.

For them, Apple’s made it possible to download the last app version that was compatible with their hardware and iOS build. Also, the company today issued a note telling developers they can easily manage availability of apps’ previous versions using the iTunes Connect web portal.

Everything we think we know about the iPhone 5C ahead of tomorrow’s launch!

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It’s now widely accepted Apple will, for the first time in iPhone history, launch not one but two new iPhones this coming Tuesday. One, a flagship iPhone 5S, and the other a long-rumored budget iPhone that should help the company tap emerging markets where telcos rarely subsidize devices.

Critics assume the so-called iPhone 5C will somehow flop because it’ll have a plastic shell. In reality, coupled with Apple’s marketing prowess and brand power, the iPhone 5C will widen Apple’s price umbrella and replace the $450 off-contract iPhone 4S as Apple’s most affordable iPhone yet – without offering a two-year old hardware.

We’ve combed through a flurry of news stories, analyst reports and speculative articles, weighing in each source/publication’s credibility to come up with a set of features we’re fairly certain the iPhone 5C will include. Of course, your guess is as good as ours so don’t shy away from voicing your opinion down in the comments…

Basically an iPhone 5 redesigned around the polycarbonate plastic casing offered in a variety of bright colors, the iPhone 5C is meant to improve Apple’s standing in emerging markets like China, India and Russia while appealing to those who are looking for a more affordable alternative to Apple’s flagship iPhone.

Here’s what we think we know so far about Apple’s controversial plastic iPhone, based on the widely-accepted rumors, leaks and reports by reliable bloggers and credulous publications.

The name: just don’t call it cheap

At first, journalists dubbed it the budget iPhone, with big media such as WSJ, Reuters andBloomberg opting for the politically correct nicknames to refer to a ‘less-pricey’, ‘low-cost’ or ‘inexpensive iPhone’.

It wasn’t until NowhereElse.fr published a set of photos showing a bunch of boxes with the label ‘iPhone 5C’ on the side that the blogosphere adopted the moniker.

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Since then, a number of analysts and outlets have confirmed the name, including WSJ,Bloomberg and China Telecom. So, what does the ‘C’ in the iPhone 5C denomination stand for? A number of theories are floating around: some say the ‘C’ means Colors.

After all, Apple’s tagline for the keynote reads “this should brighten your day” – while others postulate that the iPhone 5C stands for a ‘Chinese iPhone’, which we find hard to believe.

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One thing is pretty certain: the ‘C’ does not stand for cheap. Apple’s never added the letter ‘C’ to an iPhone model before, leading some watchers to conjure the company might perhaps market the handset as an ‘iPhone C’. Which brings me to my question of the day.

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iPhone 5C packaging render.

Assuming Apple sticks to its mid-cycle S-upgrades, what is a 2014 plastic iPhone going to be called? An iPhone 5CS? An iPhone CS? An iPhone 6C? What about 2015? There should be an iPhone 6S in 2016 so what’ll they call its budget variant, an iPhone 6CS?

Perhaps Apple should think about rethinking its iPhone naming convention?

Design: scratch-resistant plastic shell

Borrowing vague design cues from the iPhone 3G/3GS, the iPhone 5C ditches the two-tone aluminum iPhone 5 design for a rounded polycarbonate plastic casing that’s much easier to shape than aluminum. Even the lens cover appears to be plastic (the iPhone 5 uses sapphire crystal for added protection). The all-plastic casing obviously reduces parts and assembly costs, allowing for a more affordable device.

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The backplate will be colorized and the front panel should be all black, though that’s inconclusive. Taking a closer look at the inside of the backpanel, the iPhone 5C uses both metal and plastic parts to support the internal components.

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A leaked manual clearly depicts the Lightning connector and standard hardware buttons, including the mute switch and Home, power/sleep and volume up/down buttons.

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The volume up and down buttons (below) are more of a pill shape, somewhat resembling the buttons found on the fifth-generation iPod touch. Now, even though it’s made from plastic, the handset’s casing is described as pretty thick and substantial, making the iPhone 5C slightly thicker, wider and heavier than its counterpart, as seen below.

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According to a scratch-resistance video by Taiwan’s Apple Daily, the iPhone 5C has a surface hardness of 8H on the pencil hardness test, or three times stronger than the regular PET film used to protect the iPhone’s display from scratches.

KGI Securities analyst Ming-Chi Kuo pegs the plastic body between 0.4 and 0.6 millimeters thick versus the average plastic casing at between 0.7 and 1 millimeter. The mix of glass fiber and plastic allows for a stronger, thinner and lighter appearance compared to other plasticky casings.

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Along the bottom (from left to right) there’s the headphone jack, the mic hole, space for a screw, the Lightning connector, another hole for a screw and the cutouts for the speaker – again, resembling more the fifth-generation iPod touch than the iPhone 5.

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On the back, there’s an iSight camera, noise-canceling microphone and standard LED flash (leaving the rumored dual-LED flash exclusive to the iPhone 5S).

The expected cutout for the SIM tray on the left appears to be sized appropriately for the Nano SIM cards, like the iPhone 5. Like all prior handset models, the branding on the back simply says ‘iPhone’, with no model-specific moniker.

The display: four-inch Retina screen

There’s no question the iPhone 5C will pack in a four-inch display, even if the less-informed analysts have conjured up that the screen won’t be Retina for cost-saving reasons. That couldn’t be further from truth.

Make no mistake about it, Apple’s 2013 iPhone lineup is going to be all-Retina. The same goes for unfounded talk of a 3.5-inch display, which can be easily disputed by a myriad of leaked back shells.

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Will it be plastic with white or black front?

Bottom line: worst case, Apple could save a few bucks by outfitting the device with a non-IPS LCD technology, meaning poor man’s viewing angles like on the iPod touch.

Cameras: no surprises here

By all accounts, the iPhone 5C features the same front-facing FaceTime camera with a rather paltry 1.2-megapixel photos and bearable 720p HD video with up to 30 frames per second. The back-facing iSight camera is thought to be of an eight-megapixel variety with full HD 1080p video capture at up to 30 frames per second – essentially the same as on the iPhone 5.

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iPhone 5C protective case rendering.

Of course Apple could keep the costs down by downgrading the iPhone 5C’s back camera to an iPod touch-style five megapixels. Bottom line: given the company typically saves camera improvements for S-upgrades, we’re not expecting any of the iPhone 5S camera advances to make their way into the iPhone 5C.

Internals: similar to the iPhone 5

The rumor-mill seemingly agrees that many of the internals inside the iPhone 5C will match up with the currently available iPhone 5. This totally makes sense: Apple’s been building the iPhone 5 for a year and they must have optimized manufacturing and parts costs by now.

I imagine Apple’s supply chain maestro Tim Cook opted to re-use the iPhone 5 components to keep bill of materials at a minimum as opposed to engineering brand new parts. Here is reliable analyst Ming-Chi Kuo’s view of iPhone 5C internals.

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iPhone 5S/5C specs comparison chart via KGI Securities analyst Ming-Chi Kuo.

I wouldn’t hold my breath for a faster A7 chip as that package is ostensibly exclusive to the flagship iPhone 5S upgrade. Today’s photos purportedly representing the iPhone 5C logic board, posted by C Technology, conveniently echo reports of the iPhone 5 components inside the iPhone 5C.

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The iPhone 5 logic board (left) lines up nicely with the iPhone 5C screw holes (right).

Networking: no Gigabit Wi-Fi, NFC and LTE+

At a minimum, the iPhone 5C should support all flavors of fourth-generation Long-Term Evolution (LTE) technology the iPhone 5 does. We’re not expecting support for up to three times faster LTE Advanced. LTE Advanced (also known as LTE-A or LTE+) allows for theoretical simultaneous download and upload speeds of 300 megabits per second, or up to three times faster than current LTE theoretical speeds.

While LTE Advanced networking is conceivable on the iPhone 5S, cost considerations and the currently very low penetration rate of this latest standard make the ultra-fast 150MBit LTE Advanced a no-go on the iPhone 5C.

On the other hand, if China Mobile will sell the iPhone 5C, the device must support the telco’s nascent TD-LTE 4G network. There could also be a special China Mobile version of the iPhone 5C, even if that runs contrast to Apple’s penchant for keeping things simple.

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Whether or not the iPhone 5C supports 802.11ac – the latest in Wi-Fi networking – is up for the debate. Also known as Gigabit Wi-Fi, the standard promises three times the data throughput of the conventional Wi-Fi standard.

Now, only the 2013 editions of the MacBook Air family and the AirPort Express/Time Capsule wireless appliances sport 802.11ac networking . The upcoming Mac Pro will have it and it’s fairly safe to speculate that Gigabit Wi-Fi will be part of the iPad 5 and iPad mini 2, as well as Haswell-focused iMac, Mac mini and MacBook Pro refreshes.

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AirDrop, one of the headline new iOS 7 features, is hardware-dependent. Even though AirDrop does not specifically require 802.11ac chips, the feature is currently supported only on the iPhone 5, iPad 4, iPad mini and fifth-generation iPod touch.

That said, we imagine the same Wi-Fi networking capabilities from the iPhone 5 will be supported on the iPhone 5C, at a minimum. Chances of Apple giving the iPhone 5C LTE Advanced and 802.11ac capabilities are slim – it’s perfectly plausible these features are exclusive to the flagship iPhone 5S.

No, we’re not expecting NFC either.

Summing up, we think the iPhone 5C will feature Bluetooth 4.0, 802.11n Wi-Fi on 2.4 and 5GHz bands, aGPS and GLONASS, as well as DC-HSPA+ and LTE.

Colors: five bright colorways

The iPhone 5C is expected to come in various colorways, some of them revealed by the frequent part-spotter Sonny Dickson. In total, the handset should be offered in five different colors: blue, green, yellow, white and red – the latter appearing to be more of a pinkish hue.

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Sketchy reports have also called for a completely black iPhone 5C, though the leaked shots were later debunked as fake.

The fake iPhone 5C Black-iPhone-5C-Sonny-Dickson-001backplate.

Here is a potential green variant without the sticker.

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And the following image apparently represents a bunch of iPhone 5C units being warmed up at Pegatron’s Shanghai plant for quality assurance purposes.

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Pegatron is Apple’s primary assembler of the iPhone 5C as Apple seeks to diversify risk after last year Foxconn manufacturing glitches with the iPhone 5 (hint: scratches, nicks andScuffgate), according to WSJ.

The contract manufacturer, named after the mythical flying horse Pegasus, became a minor producer of iPhones in 2011 and started assembling iPad minis last year.

Packaging: plastic box ala iPod touch

Apple’s never made a plastic iPhone box before so folks were taken aback whenNowhereElse.fr published photos depicting boxes with the label ‘iPhone 5C’ on the side.

Though we can’t vouch for their authenticity, a number of photos from various sources have corroborated that the device will come inside a transparent plastic box that looks a lot like the iPod touch packaging.

Here’s iPhone 5C packaging shared by NowhereElse.fr in late-July.

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And below is the current iPod touch plastic box.

iPod touch 5G box (Flickr user by emilykiel)
Image credit: Flickr user ‘emilykiel‘.

Another claimed photo by Chinese website iApps.im suggested Apple would color-match the external coloring of the device with the wallpaper. The shot below shows us the packaging with a red iPhone 5C along with a matching red wallpaper.

 

And here’s apparently a blue iPhone 5C, still in its retail packaging.

iphone5c1-e1378108214970Blue-iPhone-5C-packaging-closeupWatchful readers could point out Apple since 2012 has been color-matching the external coloring of the iPod nanos with the wallpaper, as can be seen below.

iPod nano 7G (blue, box, Flickr user Setuka)
Image credit: Flickr user ‘setuka‘.

So what else is in the box?

According to purported photographs posted on the Chinese micro-blogging website Sina Weibo and the Dutch blog SIM Only Radar, there’s also the included manual along with the official Apple stickers, the standard regulatory documentation and the SIM ejector tool Apple’s been bundling with all iPhone models to date.

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Summing up, as the iPhone 5C is all about building a more affordable device for cash-strapped buyers. Therefore, it’s not entirely inconceivable that cost saving measures would extend to the product’s retail packaging. Another benefit of transparent plastic boxes: folks get to see the actual device right on store shelves.

Pricing: think mid-range, not cheap

The iPhone 5C should be sold for a significantly lower price than the flagship iPhone 5S when purchased off-contract, with a full retail price pegged at $350-$450 or $400-$500, depending on whom you ask. At any rate, That’s considerably more affordable than the $649 price of the unsubsidized iPhone 5.

While Apple is believed to offer the iPhone 5C both on and off-contract from day one – unlike past iPhone releases where a contract-free variant arrived a few months following the launch – carrier subsidies should bring the upfront payment down to something like $99 for customers willing to sign on the dotted line.

iPhone 5 presser (Phil Schiller, iPhone family prices)

Assuming the off-contract iPhone 5C starts out at $450 for the basic model with sixteen gigabytes of storage (or perhaps even 8GB?), the 32/64GB tiers should translate to $550 and $650, respectively. Sorry, we’re not expecting a 128GB iPhone 5C variant – yes, another iPhone 5S exclusive.

Moreover, the $99 entry price point would fit the expected $199/$299/$399/$499 tiers for on-contract 16/32/64/128GB iPhone 5S versions. Finally, if the company keeps the 16GB iPhone 5 as an entry-level option, expect it to be offered for free – with a two-year contract, of course.

One caveat: should Apple drop the iPhone 5/4S/4 from the lineup come September 20, the on-contract iPhone 5C could just as well become Apple’s new “free” iPhone.

Tim Cook (iPhone 5S, iPhone 5C, Martin Hajek 007)

I’m only speculating here, but the aforementioned price matrix would be consistent with Apple’s strategy of discounting previous-generation iPhones. Oh, we also don’t expect the iPhone 4S to be offered shortly as its smaller 3.5-inch screen would feel oddly out of place in the iPhone 5/5S/5C four-inch Retina lineup.

Last but not least, it’ll be interesting what ad tactics Apple’s marketing wizards cook up to pitch a plastic iPhone to consumers without sounding like a lesser-buy.

Availability: September 20, coming later to China Mobile and NTT DoCoMo

We’re expecting both the iPhone 5C and iPhone 5S to be available across Apple’s key markets beginning Friday, September 20, with iOS 7 preloaded. This should give Apple a period of ten days to collect pre-orders between the September 10 announcement and wider September 20 availability.

As evidenced by employee vacation blackouts – not only by Apple, but major U.S. carriers as well – the device is expected to launch simultaneously across AT&T, Verizon and T-Mobile networks. Sprint hasn’t cancelled their retail employee vacations yet so we’re guessing the telco could land the new iPhones a bit later.

The iPhone 5 launched last September in the United States, United Kingdom, Australia, Canada, France, Germany, Hong Kong, Japan and Singapore. By the end of 2012, the handset launched on 240 different carriers in a hundred countries.

iPhone 5 September 28 rollout

WSJ all but confirmed that Apple has finally inked a landmark distribution agreement with China Mobile, the world’s largest carrier. Two days ago, Reuters confirmed that Japan’s NTT DoCoMo will start carrying iPhones this Fall. Both are huge developments for Apple as the iPhone isn’t yet available on some of the world’s largest wireless carriers.

China Mobile has 700+ million subscribers, more than AT&T and Verizon combined! NTT DoCoMo is 60 million mobile users strong. Just adding these two carriers to the fold should add up significantly to iPhone sales and Apple’s bottom line.

Sales predictions

According to one estimate, expanded distribution will help the company push 13 million iPhone 5S/5C units in the first ten days of sale – or more than a million units a day – per Pacific Crest analyst Andy Hargreaves. Those would be record numbers, in accordance with the ‘most successful launch in Apple’s history’ prediction.

All told, Hargreaves expects up to 13 million iPhone sales before the September quarter closes and some 31 million units during the Christmas quarter.

iPhone 5C videos

If picture is worth a thousand words, a video may be worth a million.

• Colors side-by-side by TLDToday
• Back housing components unboxing by TLDToday
• Red iPhone 5C fully assembled, powered on, running Safari, by C Technology
• Comparison of iPhone 5/5S/5C shells, by Dom Esposito
• Scratch resistance test by AppleDaily.com.tw
• Hands-on with the yellow iPhone 5C back shell by Sonny Dickson
• Hands-on with the white iPhone 5C back shell by Sonny Dickson
• Early look at the white iPhone 5C housing by DetroitBORG
• iPhone 5C mystery case by Macotakara

You’re going to love these hands-on clips.

Signing off…

About the flagship iPhone 5S: two-tone iPhone 5 design, colorized backplate choices – including the controversial gold/champagne and graphite variants – at least a third-faster A7 chip and improved camera with much better low light shooting, 120FPS slow motion video capture, a 12 or 13-megapixel sensor and dual-LED flash.

And of course, the central feature: a redesigned Home button with an AuthenTec fingerprint sensor for user authentication (Slide To Identify?) and more. It should be the handset’s killer feature. If it means anything, insiders liken it to the seismic shift Siri was two years ago.

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Apple recently began training its AppleCare support staff and retail employees on iOS 7 and iTunes Radio so we’re expecting both devices to hit Apple Stores and carriers simultaneously. Those of you looking to dump your old device, Apple will pay up to $280 credit for used iPhones.

So what do you guys think?

Here’s everything we think we know about the iPhone 5S ahead of tomorrow’s launch!

Apple testing larger iPhone displays of up to 6 inches?

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Apple is currently testing iPhone screens as large as six inches, according to a new report from The Wall Street Journal. The news comes as many of the company’s competitors are releasing handsets with 5 and 6 inch displays—the new Note 3 measures in at 5.7.

This isn’t the first time we’ve heard that Apple is toying with the idea of making a larger iPhone. In fact, The Journal told a similar story in mid-July. So it seems that while the bigger displays are not expected to debut on this year’s model, they are on the way…

The Journal‘s Ian Sherr, Eva Dou and Lorraine Luk report:

“As Apple Inc. AAPL -0.69% prepares to unveil both a new high-end iPhone and a cheaper version for the first time next week, it is already working on something bigger.

The electronics giant has begun evaluating a plan to offer iPhones with screens ranging from 4.8 inches to as high as six inches, people familiar with the matter say. That would be a sizable leap from the 4-inch screen of the iPhone 5 released last year, and, at the upper end, would be one of the largest on the market.”

The report goes onto say that it is unclear whether Apple will choose to follow a multi-size, multi-device strategy beyond the iPhone 5C it’s expected to launch this month. But it appears to be fairly open to the idea, and is particularly interested in 4.8-inch displays.

The company has also been rumored to be testing various screen sizes for its iPad  line. Over the summer, it was reported that it was looking at tablet displays of up to 13-inches. Yesterday, a note by analyst Ming-Chi Kuo said it’s also working on a budget model.

All of this suggests that Apple is looking to expand its smartphone and tablet lines. And while we won’t likely see the new options at next week’s event, or at the proposed event in October, the consistent chatter makes you think that they may not be very far off.