Apple Inc. chief executive officer Tim Cook is ready to tackle the holiday season with a full product array, including new iPads. His challenge now is luring the hordes of buyers that analysts are projecting.
Apple recently unveiled refreshed iPads and Macintosh computers at an event at its Cupertino, California-based headquarters. The iPads are thinner and include fingerprint sensors, with the Macs boasting features such as sharper displays and faster processors. The devices follow Apple’s recent introduction of larger-screen iPhones, a smartwatch and a mobile payments system.
The line-up is ratcheting up Wall Street’s projections that Apple is entering a high growth phase, which Cook will now have to meet. The CEO is also facing calls by activist investor Carl Icahn to increase Apple’s value. Investors will get a taste of how Cook’s latest gambits are performing this week, when Apple reports fiscal fourth-quarter results on 20 October.
“It was an innovation question 12 months ago, and he’s delivered on all of the promises he was making,” Gene Munster, an analyst at Piper Jaffray, said of Cook. “Now it’s an execution game.”
Cook was confident about growth, saying that the company has “the strongest line-up of products that Apple has ever had”.
Having updated devices on store shelves is key ahead of the year-end shopping season, which is typically Apple’s most lucrative quarter. Consumer spending on electronics in the US is projected to increase 2.5 per cent to $33.8 billion, the highest level since the Consumer Electronics Association began tracking it in 1994. The top items on technology wish lists, according to the association’s annual Holiday Purchase Pattern Study, are tablets.
iPad Demand
Cook needs to ignite new interest in iPads, after sales of the device declined for two consecutive quarters. The iPad’s global market share slipped 6.1 percentage points during the second quarter, as Samsung Electronics Co. and other smaller players nibbled at Apple’s lead, according to IDC.
“When you create a market like Apple did, all you can do is lose share over time,” Jean Philippe Bouchard, an analyst at IDC, said. “The low end of the market is just exploding.”
Brian White, an analyst at Cantor Fitzgerald, was more sanguine about Apple’s prospects. 'We believe Apple is in the midst of what we view as a ‘super cycle’ that we expect will keep the stock heading in an upward trajectory,' White wrote in a note.
Apple shares rose 1.5 per cent to $97.67 at the close in New York on Friday. The stock has advanced 22 per cent this year.
New Features
Apple’s new offerings include the iPad Air 2, which is 6.1 millimetres thin, as well as an iPad Mini 3. The tablets feature a fingerprint sensor and will come in a new gold option, along with silver and grey. Apple said the iPad Air 2 is priced at $499 to $829, with some models that have more memory costing $100 less than previous versions, and the new iPad Mini is $399 to $729.
Apple also debuted a new 27-inch iMac with a retina display that costs $2,499. The company also showed a new Mac Mini with a starting price of $499.
“Those who have iPad 1s and 2s will probably be tempted to finally upgrade,” Tim Bajarin, president of Creative Strategies Inc., said of the new tablets. “Whether it’s a big hit or not, it’s hard to tell because right now, tablets in general have slowed down.”
In the fiscal third quarter, iPad sales declined 9 per cent from a year earlier to 13.3 million units, with revenue falling 8 per cent to $5.89 billion.
Product Availability
To help stoke demand, Apple lowered the price of its iPad Mini 2 and iPad Air, which the new models replace. Apple’s new iPhones, meanwhile, sold more than 10 million units during their debut weekend last month. The phones are reaching an additional 36 countries this month, including China, India and South Korea, and are on track to be in more than 115 countries by year end, Apple said in a statement.
Cook said that the past few weeks have been the company’s “biggest iPhone launch ever”. He added that pre-orders of the smartphone in China have set a record, without disclosing numbers.
Roll-out Trouble
Apple experienced snafus following the debut of the new iPhones, including complaints about how some of the handsets were bending and a new version of its iOS 8 mobile operating software that caused people to lose cellular service. At the event, Apple senior vice-president Craig Federighi said that almost half of the company’s customers are now using the latest version of the software.
Cook also said that Apple will roll out Apple Pay, the new mobile payments system, on 20 October. He said that an additional 500 banks have signed up to support the service, building upon the large banks, including Bank of America Corp. and Citigroup Inc., that said they would work with the service last month. With Apple Pay, consumers can use their iPhones to pay for goods within stores such as Whole Foods Market, Inc.
Bloomberg News, edited by ESM
