Apple's Watch is designed to be both fashionable and functional.
Apple Acknowledges Consumers Want Larger and Cheaper Phones
The documents posted by Re/code include an Apple slide deck from April, 2013 for 2014 planning. The document includes graphs showing that Apple's growth rates are slowing quarter after quarter. The main reason for the decline amongst consumers? Consumers want less expensive and larger screen smartphones:
In a further breakdown, Apple acknowledges that "consumers want what we don't have" -- which shows that the majority of smartphone growth is in both >4" screen sizes and <$300 markets.
Apple has been heavily rumored to be introducing a larger iPhone 6 this fall. The size of the new iPhone has been thought to be 4.7" or 5.5" with the 4.7" model coming first. While rumors have been consistent, Apple's own insights from 2013 explain why such a move is likely to happen.