Apple Inc. (NASDAQ:AAPL)’s iPhone is largely the focus of investors and consumers right now, mostly because of the iPhone 5S and 5C launch. However, Barclays analysts think there’s more to it than that. They believe Apple has essentially become a one-product company and that it needs another one in order to warrant a higher multiple from them. They see the 64-bit chip in the iPhone 5S as providing a key piece of how Apple could expand its business into other products—particularly a new “more useful” iPad.

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Apple should revive the iPad

Analysts Ben A. Reitzes, Ryan Jones and Matthew Markezin-Press say that Macs and even the iPad appear to “be almost forgotten.” They note that the iPhone has a larger total addressable market and the shift toward the iPhone is better for margins, but they suggest that Apple Inc. (NASDAQ:AAPL) needs to have more than one growing product.

They believe “the next real product” may be obvious. They’re expecting a completely redesigned iPad. They point to the iPad as a “transformational ‘second product’” between 2010 and 2012 and suggest that it could be again. However, they believe it has to change because of the current competition.

Apple needs a larger iPad

There have been rumors circulating that Apple Inc. (NASDAQ:AAPL) was testing iPads with bigger screens, maybe even as big as 13 inches. The Barclays analysts believe this larger iPad is exactly what the company needs. They point to the 64-bit processor in the iPhone 5S as a suggestion that this is indeed the direction in which Apple is going.

They believe the larger iPad should have “a real Apple-made keyboard cover accessory with a track pad. Interestingly enough, it sounds like what they’re describing is similar to what Microsoft Corporation (NASDAQ:MSFT) has done with the Surface and Surface 2 tablets—only bigger.

Merging iOS and OS X

The analysts said Apple Inc. (NASDAQ:AAPL) could even be working on merging some of the features of iOS and OS X. They believe that the entire iOS app eco system, paired with longer battery life, “ultraportability and user familiarity could be more compelling than a Mac if Apple made a true effort.”

They suggest that a larger iPad would be a better PC replacement than other tablets, including Microsoft’s Surface tablets. They want the new iPad to be able to handle bigger tasks and “start another wave of notebook cannibalization.”

The need for a “more useful iPad”

The Barclays analysts believe that a revival of the iPad could help Apple Inc. (NASDAQ:AAPL) reaccelerate earnings growth because if it was more useful, the company would be able to expand its total addressable market by tens of millions. They said with an average selling price of $650 and 35 percent incremental margins, every 10 million units of such a device would add approximately $2 in earnings per share. In addition, they believe if Apple can add accessories, the contribution to earnings could be even bigger because accessories have even larger gross margins.

The analysts kept their Overweight rating and $540 per share price target on Apple Inc. (NASDAQ:AAPL).