Will Apple Surprise With New iPhones Tomorrow?

Tomorrow marks the beginning of Apple's (NASDAQ: AAPL  ) Worldwide Developer Conference, or WWDC. The opening keynote has frequently been used as a staging ground for product introductions, including both hardware and software. For years, Apple used WWDC to unveil new iPhone models before shifting the iPhone product cycle to the fall last year.

There's been much speculation about when Apple will release new iPhones this year, and Tim Cook strongly hinted that new models wouldn't be due out until "this fall," which reset investor expectations. Most investors have now come to expect an affordable iPhone as well as an updated flagship iPhone 5S to be launched later this year, possible in the September or October timeframe.

However, could Apple surprise everyone by unveiling new iPhones during tomorrow's opening keynote?

Can Apple pull a fast one?
ISI Group analyst Brian Marshall thinks that's a distinct possibility. Marshall believes that the company has accelerated development of both iPhones and could be preparing production. Tim Cook spoke recently at D11 and seemed quite open to the idea of expanding the iPhone lineup, which Apple has historically kept to one model per year.

Cook noted the differences in the iPod and iPhone product families, saying that Apple quickly expanded the iPod because there were more distinct segments of the music player market that needed to be addressed in different ways. In contrast, smartphone development is much more complex, so Apple has thus far remained focused on its singular flagship model each year.

Unveiling new iPhones a few months in advance may not seem like a lot, but that three- to four-month difference actually goes a long way. Consider AT&T's upgrade policy, which typically allows postpaid subscribers to upgrade devices after 20 months. Apple saw a shockingly strong spike in iPhone sales when the iPhone 4S launched in 2011, selling more than 37 million units.

Source: SEC filings. Fiscal quarters shown.

That's an awful lot of iPhone 4S buyers who just became eligible for upgrades last month and have itchy trigger fingers. The subsidy model structurally gives consumers incentive to upgrade as soon as they're eligible, and prospective buyers are now seeing an onslaught of competitive smartphones hitting the market, particularly with Android devices such as the Samsung Galaxy S4 and HTC One. That's precisely why fellow Fool Rick Munarriz apologetically switched.

For prompt upgraders like Rick, Apple has to wait another 20 months before it has a shot at winning him back, if at all. Surprising consumers and competitors with new iPhones tomorrow would be a huge boon for investors, and we don't have to wait long to see if Apple pulls a fast one.

Apple has a history of cranking out revolutionary products ... and then creatively destroying them with something better. Read about the future of Apple in the free report, "Apple Will Destroy Its Greatest Product." Can Apple really disrupt its own iPhones and iPads? Find out by clicking here.