Analyst says Apple may launch new internet service, 'killer iOS app' after meeting with management
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.
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.
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.
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.
Comments
Neither does Katy. Never has.
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
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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 :-)
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.
Quote:
Originally Posted by lightknight
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?
Quote:
Originally Posted by lightknight
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.
Quote:
Originally Posted by Realistic
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.
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?
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.
Quote:
Originally Posted by Slurpy
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.
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.
"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.
Quote:
Originally Posted by Realistic
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.