Apple (AAPL – Free Report) had an eventful month that included regulatory pressures, privacy issues, Apple TV advancements, positive reviews and an acquisition to boost Music, ending with upgrades to its iPads and MacBooks. Here is a brief recap, as we prepare for its earnings report tomorrow-
Italy Fines Apple
Software updates slowing down older devices is an old problem but Italian authorities taking exception to it is a new one. Last week, they fined Apple and Samsung 5 million euros ($5.7 million) each for issuing updates that seriously slowed down devices and caused them to malfunction. This pushed customers to upgrade their devices.
An additional 5 million euros was demanded of Apple for failing to give clients clear information about how to maintain or eventually replace handset batteries.
Apple admitted last year that some updates did slow down devices and subsequently agreed to partly cover battery replacement cost.
Apple Opposes Aussie Bill
Earlier this month, Apple raised concerns regarding Australia’s Access and Assistance Bill 2018. While appreciating certain aspects of the bill, Apple says the government’s move to mandate backdoors for access to user data is dangerous and could help hackers instead. The main problems highlighted were:
- Overly broad powers that could weaken cybersecurity and encryption
- A lack of appropriate independent judicial oversight
- Technical requirements based only on the government’s subjective view of reasonableness and practicability
- Unprecedented interception requirements
- Unnecessarily stifling secrecy mandates
- Extraterritoriality and global impact
Submissions were accepted til Oct 12.
Other Privacy Matters
A new tool will allow Apple customers in the U.S., Canada, Australia and New Zealand see and download all information that Apple has collected on them and make changes to the data, suspend their Apple account or even permanently delete it. The feature is a necessary part of the EU’s GDPR that Apple is taking elsewhere.
Being a hardware-focused company with a highly overpriced product line, Apple usually maintains the data on the users’ devices and encrypts it upon transfer.
Apple has used its position on data collection as a competitive differentiator against Facebook (FB – Free Report) and Alphabet’s (GOOGL – Free Report) Google, which don’t charge for their basic services and instead use the data collected on devices to sell ads and develop artificial intelligence. Of course there are both positive and negative sides to this data collection that the world of technology and governments haven’t resolved yet.
On Apple TV
As a result of the close integration of PlayStation Vue, Sony’s streaming video service, PS Vue subscribers can now watch their favorite shows whether on-demand or live not only from the PS Vue app but also from the TV app on Apple TV, iPhone and iPad.
Once users log in to their Vue account, Apple will start pulling in shows, including on-demand programming from cable channels and live sports from national and regional networks, displaying it in its “Watch Now” (on-demand offerings) and “Up Next” (helps you pick up where you left off watching programs) sections.
Meanwhile, Apple is also getting ready to launch its own Pay TV subscription service in 100+ countries to compete with rival offerings from Netflix (NFLX – Free Report) and Amazon (AMZN – Free Report) , starting with the U.S. in early 2019.
Analyst Sees Surge In Cheaper iPhone XR
Famed Apple Analyst Ming-Chi Kuo has high expectations of the lowest-priced of Apple’s latest iPhone models, the XR. The accuracy of his predictions stems from his close ties with people in Apple’s supply chain.
The model didn’t look as popular at first because pre-orders didn’t sell out, but Kuo points out that demand was still stronger than the 8 and 8 Plus. Moreover, preorders sell out because of enthusiast demand whereas the typical XR, which has an entry-level price of $749 attracts the kind of person who is probably used to operating iOS, who favors the Apple brand, has a limited budget or no urgent replacement demand.
For such people, the “larger display, longer battery life, dual SIM-support, and new form factor design” of the LCD device are attractive. This is a solid group of Apple loyalists who can ultimately help the XR outsell the iPhone XS and iPhone XS Max.
Based on these factors, Kuo raised his iPhone XR shipment estimate in the fourth quarter by 10% to 37 million. He also expects shipments to decline 25-30% in the first quarter, beating the typical 30-40% seasonal decline on most consumer electronics and the 45-50% decline seen by the iPhone 8. This will push total iPhone shipments to 77.5 million in the current quarter and 57.5 million in the following quarter, with XR accounting for half of all sales.
Buys Music Analytics Company Asaii
After swallowing music discovery company Shazam, Apple has moved on to other fish. Asaii, the company’s latest acquisition that was reportedly acquired for less than $100 million, will further boost its Music offerings once Apple puts its signature dashboard to work for it.
The company pulls in data from both music services and social media in a way that surfaces artists that are most likely to make it big. So while it also allows record labels plan marketing campaigns and live tours, it helps them sign on the people that will make them a lot of money.
Apple may also use its recommendation algorithm to boost its playlists the way Spotify (SPOT – Free Report) does with its Daily Mix and Discover Weekly services.
The New York Times reports that Apple news has around 90 million voracious readers, generating a million page views per story. Editor in Chief Lauren Kern feels that Apple’s success stems from its hand curated reading list that uses only trustworthy sources and does away with fake news.
This differs she feels from the algorithmic approach that other news aggregation services take. But advertisers get jittery because they don’t get much ad revenue and also can’t access customer data. There’s also the concern that some bias comes in, which of course is also a part of the algorithmic approach that is ultimately set up by humans.
Apple Owes Qualcomm
Qualcomm (QCOM – Free Report) said in a court hearing last week that Apple owes it $7 billion (£5.5 billion) in patent license fees. The two have accused each other of patent infringement in court and Apple has questioned the FRANDS system of collecting royalties on standard essential patents. It has also said that Qualcomm bundles patents together in a way that forces the company to license technology it may not need to. The dispute has continued for long and Intel (INTC – Free Report) has been a prime beneficiary.
Apple shares carry a Zacks Rank #3 (Hold). For smarter picks see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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