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Analyst says Apple may launch new internet service, 'killer iOS app' after meeting with management

post #1 of 51
Thread Starter 
In a note to investors on Thursday, Morgan Stanley analyst Katy Huberty, who recently met with Apple management, said the company could debut new internet-based services as well as a "killer app" later this year.

In the near term, Huberty said Apple could make a surprise announcement at the upcoming Worldwide Developers Conference in June regarding a new type of internet service such as streaming music or a mobile payment system. She went on to say that Apple Internet Software and Service chief Eddy Cue is believed to be working to improve existing services like iCloud and Maps, but at the same time is planning to launch new initiatives.

Morgan Stanley
Source: Morgan Stanley


"We believe Apple could charge either developers or users for some of these services, which could boost Apple?s annuitized revenue stream and better monetize its large user base," Huberty writes. "For example, Apple could offer a streaming music service using a freemium model." Freemium apps allow users to download and use certain titles for free, with costs recouped through advertisements or in-app purchases. Sometimes these apps offer to remove ads for a certain price.

The analyst pointed to the recent hiring of Kevin Lynch, who led subscription-based services and wireless device development at Adobe, as a sign that Cupertino may be on the verge of announcing a new project.

Apple is rumored to be working on an Internet radio service, dubbed "iRadio," though disagreements between the company and content owners over royalty rates are supposedly holding up proceedings. A report last week claimed Apple was close to inking a deal with Warner Music and Universal Music Group, but there has yet to be an official announcement regarding such an arrangement.

Coming later in the year, Huberty expects major earnings catalysts to be the debut of a next-generation "iPhone 5S" along with a low-cost model, new carrier distribution with Japan's NTT Docomo and China's China Mobile, and a "killer app" akin to Siri for the iPhone 4S.

As for the app, the analyst offers the example of mobile payments, an area into which Apple has already dipped a toe with Passbook. Such a new feature, Huberty argues, could help drive iPhone 5S sales in lieu of a design overhaul.

In addition, Huberty says Apple is likely to announce a cash return program, noting that the company could roughly double total annual return to $25 billion to $30 billion. This would be accomplished by instituting a dividend yield increase to over 3 percent, up from 2.5 percent, while buybacks would return the remaining cash. A report in March suggested that Apple would return some of its growing $137 billion cash hoard through similar dividends and share buybacks.

Morgan Stanley maintains an "overweight" rating for AAPL stock with a price target of $600.
post #2 of 51
Aren't these analysts under an NDA or something when meting with management, that prevents them from running their mouths like this? I don't get it.
post #3 of 51
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Originally Posted by Slurpy View Post

Aren't these analysts under an NDA or something when meting with management, that prevents them from running their mouths like this? I don't get it.

Neither does Katy. Never has.
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post #4 of 51
Well, there's nothing in her report that wasn't already "established" via previous rumours, so there's not much disclosure happening here.
post #5 of 51
The phone and tablets are clearly seen as money boxes. Personally I'm tired of being nickled and dimed and now more often than not don't bite the hook. Used to in the beginning but don't any longer as I once did.
Wonder how long it will take Apple to notice?
It's like Disney creating animated films that are only those that have characters that can be translated in to plush toys
post #6 of 51
We're not saying its radio, but its radio.
post #7 of 51
I think the new information here is that more revenue might be extracted from developers, that suggests a completely new addition to the business model. The most likely option in that space I'd think would be electronic payments. If the passbook model is expanded to full electronic payments then the developer could earn income from financial transactions made from their parter apps, with Apple picking up a transaction fee.

So, buy a ticket to an event or for a flight on an airline directly from the phone. The result is billed to the credit card attached to the iTunes account, and the ticket added to passbook, Apple take a percentage on top of the credit card fee for each sale.

Well, in my dreams.... I'd like to see the AAPL share price go to$1000 :-)
post #8 of 51
1.000? Yepp. Possible
post #9 of 51
$600 is not overweight , it is a normal thing as Apple has reached this before .
post #10 of 51
Is it just me that thinks that monetizing users (who already pay for their hardware... and they're not exactly inexpensive) or developers (who're there to make money, not to make Apple richer) sounds like a Google idea?

Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

 

http://m.ign.com/articles/2014/07/16/7-high-school-girls-are-kickstarting-their-awa...

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Social Capitalist, dreamer and wise enough to know I'm never going to grow up anyway... so not trying anymore.

 

http://m.ign.com/articles/2014/07/16/7-high-school-girls-are-kickstarting-their-awa...

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post #11 of 51

I do believe something is coming soon. So far this year all we've had is an MBP speed bump and an OS X point update, and it's April. The radio service will probably be it.

post #12 of 51
Quote:
Originally Posted by lightknight View Post

Is it just me that thinks that monetizing users (who already pay for their hardware... and they're not exactly inexpensive) or developers (who're there to make money, not to make Apple richer) sounds like a Google idea?

So you think that by buying an iPhone, iPad or whatever from Apple you should be entitled to getting other products or services for free from Apple as they are created and released?

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"A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools." Douglas Adams

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post #13 of 51
Quote:
Originally Posted by lightknight View Post

Is it just me that thinks that monetizing users (who already pay for their hardware... and they're not exactly inexpensive) or developers (who're there to make money, not to make Apple richer) sounds like a Google idea?

I appreciate that a streaming service will have running costs but others such as Nokia manage to provide their service at no cost to the consumer and without adverts, relying instead on profits from selling the tracks. The constraints do however limit choice.

post #14 of 51
Quote:
Originally Posted by Realistic View Post

So you think that by buying an iPhone, iPad or whatever from Apple you should be entitled to getting other products or services for free from Apple as they are created and released?

If the maker of a phone is marketing a feature/app as a "killer" must have, then many consumers would expect it to be free.

post #15 of 51
Quote:
Originally Posted by lightknight View Post

Is it just me that thinks that monetizing users (who already pay for their hardware... and they're not exactly inexpensive) or developers (who're there to make money, not to make Apple richer) sounds like a Google idea?

I hate Google as much as anyone here but what sounds like a Google idea is just the opposite. Google gives away free service (then mine our dates of course). Monetizing users is always Apple strategy. I don't mind them monetizing me by giving me greats service (like App Store, iBook Store or even Newsstand). Let's wait and see what this killer app turns out to be before criticizing, shall we?
Edited by matrix07 - 4/11/13 at 3:52am
post #16 of 51
Hiring Lynch obviously points towards Xcloud (Aperture, FinalCut, Logic) but since Apple hasn't been that active with pro-apps than with mass consumer apps, it sounds a bit too much to hope for...

iWork.com beta existed for some time, and I have been wondering if it ever comes back, integrated in iCloud. Microsoft is delaying Office for iOS (and even for their Metro-interface), this could be a good opportunity for Apple while thinking of their corporate customers. Office is an expensive bundle and includes a LOT of things that an avarage person does not need. iWork update is long overdue, even though it really doesn't need much improvements since it is not broken in any ways.

I don't think that either of the above mentioned could be understood as "killer apps", so it must be something new - a radio perhaps, re-invented.
But why Lynch??? And what happened to AppleTV speculations in this context?

Wish we got iTunes Cloud/Match in Finland as well.
post #17 of 51
Quote:
Originally Posted by Slurpy View Post

Aren't these analysts under an NDA or something when meting with management, that prevents them from running their mouths like this? I don't get it.


No. Typically, analysts do not sign NDA. In fact, there could be legal implications if they do and consequently gain access to confidential information unavailable to "common" investors.

post #18 of 51

Oh great...another crappy internet service from Apple. I can't wait. Maybe they should fix iCloud before they start releasing more stuff like this. 

 

I agree though...I bet its iRadio or whatever they want to call it. 

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post #19 of 51

"Eddy Cue is believed to be working to improve existing services like iCloud and Maps"

 

"Believed" to be working on these services? We know that Apple tends to be coy. But if Huberty came away from the meeting less than 100% sure that Cue is working on improving these services, she is either the most conservative person ever or not listening. In fact, does she have to meet Apple's management team to *know* and not just *believe* that this is happening?

 

While she hedges on something that is a certainty, she does not hesitate to go along with the rumor of 5S, even though there is no chance Apple would have given her the slightest hint about unannounced hardware.

 

Katy Huberty publishes reports on her meetings with Apple's Sr Managers at least once a year. Should be easy to compile her track record on this.

post #20 of 51
Quote:
Originally Posted by Realistic View Post

So you think that by buying an iPhone, iPad or whatever from Apple you should be entitled to getting other products or services for free from Apple as they are created and released?

Well... YES.

 

For example:

 

Person A buys a Mac and an iDevice.

Just f*cking give person A itunes Match  and more icloud storage!

 

Make your best costumers (the ones that are really deep on the ecosystem) to not have to think about those services.

post #21 of 51
Quote:
Originally Posted by lightknight View Post

Is it just me that thinks that monetizing users (who already pay for their hardware... and they're not exactly inexpensive) or developers (who're there to make money, not to make Apple richer) sounds like a Google idea?


Apple already monetizes developers (30% of sales thru App Store, in addition to $99/yr). I am not aware of Google doing more in this regard (difference is negligible, afaik).

 

Apple also monetizes users for more than hardware - iTunes, App Store.

 

Google just does it differently. It's not monetization through advertising that makes Google a questionable company. It's the evolution of contextualization technology that has raised the privacy stakes.

post #22 of 51
Quote:
Originally Posted by pedromartins View Post

Well... YES.

 

For example:

 

Person A buys a Mac and an iDevice.

Just f*cking give person A itunes Match  and more icloud storage!

 

Make your best costumers (the ones that are really deep on the ecosystem) to not have to think about those services.


Apple has a history of being less than generous on such fronts. I believe that increasing these "fringe benefits" would be a better use of their cash than dividends (in reality, not a real use of cash but a small dent in their earnings). But that would drive down their quarterly numbers and consequently their stock. So it would be a lose-lose for shareholders and win-win for customers. Currently, in this respect, Apple's dividends program punishes customers to reward shareholders.


Edited by ankleskater - 4/11/13 at 4:20am
post #23 of 51
Quote:
Originally Posted by matrix07 View Post


I hate Google as much as anyone here but what sounds like a Google idea is just the opposite. Google gives away free service (then mine our dates of course).

I really, really hope you meant "data"
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post #24 of 51
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Originally Posted by Entropys View Post

I really, really hope you meant "data"

Damn iPad auto correction. Lol.
post #25 of 51
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Originally Posted by ankleskater View Post


Currently, in this respect, Apple's dividends program punishes customers to reward shareholders.

 

Huh?  How are customers hurt by Apple's dividend program?  Apple have enough money in the bank to pay the current dividend rate for years, they aren't missing any opportunities because of the dividend.

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post #26 of 51
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Originally Posted by ankleskater View Post

"Eddy Cue is believed to be working to improve existing services like iCloud and Maps"

"Believed" to be working on these services? We know that Apple tends to be coy. But if Huberty came away from the meeting less than 100% sure that Cue is working on improving these services, she is either the most conservative person ever or not listening. In fact, does she have to meet Apple's management team to *know* and not just *believe* that this is happening?

While she hedges on something that is a certainty, she does not hesitate to go along with the rumor of 5S, even though there is no chance Apple would have given her the slightest hint about unannounced hardware.

Katy Huberty publishes reports on her meetings with Apple's Sr Managers at least once a year. Should be easy to compile her track record on this.
Yeah I scratched my head on that one too. Um, if Eddy isn't working on those things then we have a serious problem in Cuppertino. And is that something we're supposed to be impressed by - someone doing their job?!? Anyway with the recent iMessage outage for some its clear Apple had plenty of work on the services side of things.
post #27 of 51
Quote:
Originally Posted by macxpress View Post

Oh great...another crappy internet service from Apple. I can't wait. Maybe they should fix iCloud before they start releasing more stuff like this. 

I agree though...I bet its iRadio or whatever they want to call it. 
I hate to say it but iRadio doesn't interest me. I currently have Spotify and love it. Never use iTunes. Now if Apple offered something similar to Spotify and it was free (or reduced price) for owners of iDevices/Macs I'd think about it. But for me it would have to offer the ability to play any song on demand and allow for cache so you can listen to stuff when you don't have connectivity. Since I don't see that happening, I'll stick with Spotify.
post #28 of 51
Why do we need a new Radio service? What could Apple possible add to Pandora and Spotify among others?
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post #29 of 51
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Originally Posted by rmusikantow View Post

Why do we need a new Radio service? What could Apple possible add to Pandora and Spotify among others?

A better service, better integration, much larger user base, make artists support services like this (when everyone uses them).

 

Class.

post #30 of 51
'Killer'? Sounds like low-margin, nice-to-haves (not must-haves) for Apple. Initiatives like a better cloud and iRadio will hardly move the valuation needle.

I hope Apple is on the verge of announcing some truly killer product, by which I mean hardware.
post #31 of 51
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Originally Posted by AppleInsider View Post

In a note to investors on Thursday, Morgan Stanley analyst Katy Huberty, who has never been right about any of her previous predictions.

There. Fixed that for you.
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"I'm way over my head when it comes to technical issues like this"
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post #32 of 51
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Originally Posted by jragosta View Post
Quote:
Originally Posted by AppleInsider View Post

In a note to investors on Thursday, Morgan Stanley analyst Katy Huberty, who has never been right about any of her previous predictions.


There. Fixed that for you.

 

Ironically, you are wrong about her never being right. But I get your (very light) sense of humor. The dig about very light is not personal. I just find the whole quote-fixing meme questionable - It's not really funny, and serves to mislead others who have not read the original.

post #33 of 51
Quote:
Originally Posted by rmusikantow View Post

Why do we need a new Radio service? What could Apple possible add to Pandora and Spotify among others?


In 2006/07, many people were asking the same question about mobile phones.

post #34 of 51
Quote:
Originally Posted by Crowley View Post

 

Huh?  How are customers hurt by Apple's dividend program?  Apple have enough money in the bank to pay the current dividend rate for years, they aren't missing any opportunities because of the dividend.


It's not an intuitive concept but it's also not rocket science (but apparently some people here are rocket scientists). Give it some thought.

post #35 of 51
Quote:
Originally Posted by Slurpy View Post

Aren't these analysts under an NDA or something when meting with management, that prevents them from running their mouths like this? I don't get it.

I felt the same. 

post #36 of 51

I hope it isn't a streaming ANYTHING service. All of these streaming services are great, until you reach your data cap and end up with a HUGE bill, or you get throttled beyond being usable. 

 

The average consumer just can't comprehend that cellular data is NOT an unlimited resource for everyone to hog down all they can eat. Does nobody remember what happened to AT&T? Yeah, they probably could've done a little more to boost their network, but the average user suffered because of the extreme data hogs. I used to easily hit over 5Mbps in my area with AT&T, but that's a thing of the past. It appears they've reduced everyone's data speeds to help spread it out. I'm lucky to break 2-3Mbps now with full signal. 

 

I hope they announce some sort of better data compression tech as part of iOS 7. That'll help users get more for their data dollars. 

post #37 of 51
Quote:
Originally Posted by ankleskater View Post

Ironically, you are wrong about her never being right. But I get your (very light) sense of humor. The dig about very light is not personal. I just find the whole quote-fixing meme questionable - It's not really funny, and serves to mislead others who have not read the original.

Pray tell, what significant predictions has she ever made that turned out to be right? (Not the ones where everyone in the world already knew something and she 'predicted' it).
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"I'm way over my head when it comes to technical issues like this"
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post #38 of 51

So ... Katy met with management, they provided her no new information about any upcoming products or services other than "we've got some great stuff coming" and she used recent rumors to come up with her predictions?

post #39 of 51
Quote:
Originally Posted by elliots11 View Post

We're not saying its radio, but its radio.

 

Except it's not radio.  

 

It's a streaming music service, which is actually quite different from radio or even "internet radio."  

post #40 of 51
Quote:
Originally Posted by anantksundaram View Post

'Killer'? Sounds like low-margin, nice-to-haves (not must-haves) for Apple. Initiatives like a better cloud and iRadio will hardly move the valuation needle.

I hope Apple is on the verge of announcing some truly killer product, by which I mean hardware.

 

Her "killer app" statement seems to refer to the purported fingerprint reader thing, not the streaming music app.  If it's done correctly, it could easily be at least as big a deal as Siri and have everyone gushing over it.  

 

Also like Siri, it may not actually work very well and a few months later we might all be wondering why we thought it was so revolutionary, but at the outset, I could see this being a "killer app." 

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