Apple Inc. (NASDAQ:AAPL) shareholders need not get jittery despite the stock topping $156 in May and June. Since Apple’s WWDC event ended, the market appears to have unwound all the potential upside ahead for Apple. Maybe Apple’s legal battle against Qualcomm, Inc. (NASDAQ:QCOM) is starting to weigh negatively on its share price.
Apple is playing hardball with Qualcomm in the courtroom. It wants the court to invalidate the royalty license agreements. If Apple wins, it would get back $1 billion from QCOM.
This is small change for Apple, but it has significant consequences to Qualcomm’s business. Currently, QCOM partners must guarantee a license agreement. When they do so, they may get the chips.
But Apple’s legal battle against Qualcomm could backfire, even if it wins. I’m talking specifically about costs to the customer. Apple iPhone SE devices cost nearly $150 more than an iPod; an iPad LTE costs that much more than an iPad without LTE (WiFi only). But Qualcomm’s technology costs around $10 for Apple.
If it beats Qualcomm in the courtroom, but does not pass the savings to the consumer, that could create a public relations nightmare for the iPhone maker.
Apple’s AR Developments
Looking beyond the drama between Qualcomm and Apple, WWDC 2017 suggests Apple is setting a new course toward augmented reality. Recall that the company is providing ARKit, a platform for developing AR apps for the iPhone and iPad. Apple furthered that goal by acquiring an eye tracking firm called SensoMotoric Instruments. This company makes eye tracking solutions for the AR and VR markets. This is also used in the clinical research and in-car systems markets.
SensoMotoric developed eye-tracking technology for Oculus Rift, Facebook Inc (NASDAQ:FB) owns. In effect, Apple’s acquisition of this company puts it in competition with the social network giant’s VR subsidiary.
ARKit’s release, the sale of iPhone SEs in India, and buying SensoMotoric further’s Apple’s ambitions beyond just the smartphone market.
No News on iPhone 8
After the iPhone’s 10 year anniversary came on June 29, Apple did not yet announce or hint of any details for an iPhone 8 release. This should not surprise anyone. Apple is taking its time to develop the refresh and will probably target an announcement in the fall.
Tech gadget sites speculate that the iPhone 8 will have an all-screen front design, but will not have a fingerprint sensor in the display. There are even rumors that Apple will remove 3D Touch multitasking in iOS 11.
Apple’s latest iPhone iteration faces significant competition. Samsung Electronics (OTCMKTS:SSNLF), after recovering from the exploding Galaxy Note fiasco, released the S8 and S8+. The OnePlus 5, released last month in June, weighs just 153 grams, has 64GB to 128GB of storage and 6GB to 8GB of RAM. Meanwhile, Qualcomm’s Snapdragon 835 Octa-core processor powers the OnePlus smartphone.
Apple may feel the pressure in including an A11 chip that outperforms current Android phones on the market.
Apple’s New Market: HomePod
As fans wait for the next iPhone, Apple hopes the crowd will buy a HomePod in the interim. Due to its early entry into the market, Amazon.com, Inc. (NASDAQ:AMZN) has an edge over the competition. Apple’s voice-activated speaker could face even more headwinds: Samsung is apparently developing speakers with its digital assistant, Bixby.
In reality, Apple has a good chance of succeeding in this market. Amazon sold only around 8 million units as of February 2017 and around 10 million to date. Apple’s real success will come as it invests even more in Siri.
The better the digital assistant gets, the more it will drive HomePod sales. iPhone and iPod devices also benefit when Siri’s functionality improves.
Apple stock is still attractive for value investors. The company continues to broaden its product line, but the market’s anticipation for iPhone 8 later this year will only add positively to its share price.
As of this writing, Chris Lau did not hold a position in any of the aforementioned securities.
