Market share in that scenario will look worse even worse when you factor in the growth of the smartphone market. In a year or 2, 150M iPhones won't even represent 10% of the smartphone market, so applying this tactic of "business as usual," (eg, Apple stubbornly chooses not to lower ASP to counter market share loss), they would dwindle to sub-10% niche (premium) status, like they have with the Mac.
Yep, my worst case scenario would see an outright decline in iPhone units after FY2015 and the presumed launch of a large screen iPhone.
However, this discussion really does highlight the current valuation. There is no scenario where I see earnings declining overnight. If earnings are $40 this year, $40 next year (helped by a large screen iPhone) before declining to $30 and then $20, I can still justify a >350 valuation...and that is after heavily discounting the cash held overseas.
If you dont discount the cash, it pushes it up to the low 400's.
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