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Does Apple Inc. Have a Quality Problem With Its Software?

Apple is being more mindful on fixing issues, not launching many new products

By Tom Taulli, InvestorPlace Writer & IPO Playbook Editor

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Today Apple Inc.’s (NASDAQ:AAPL) annual Worldwide Developers Conference (WWDC) will get started. No doubt, we’ll see some way-cool things for iPhones, iPads and Macs. The buzz is that some of the new Apple software will showcase cutting-edge AR (augmented reality) and AI (artificial intelligence).

While all this should be great, there are still some nagging concerns. The fact is that Apple software is getting very complicated, and this is perhaps starting to impact the quality of the customer experience.

For example, a recent post in The Wall Street Journal points out that — since last September — the company has issued 14 software updates for its iOS platform. There was also a 46% increase in the number of bug fixes to 67. Keep in mind that some of the errors have been, well, weird. This was the case when the letter “I” was being replaced by some gibberish.

Now for mega-tech companies, such as Facebook, Inc. (NASDAQ:FB), Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT), such things may not necessarily be problematic.

But then again, Apple’s mission is to strive for the highest quality and sell its products for premium prices. Besides, the company has the advantage of controlling both the software and the hardware, which allows for a much more seamless experience.

Yet when it comes to software, it can be tough to manage new features, especially when they are scaled across millions of users and are based on aging code bases. It also does not help that Apple has many more devices and that the company releases a new OS every year.

It’s interesting to note that Microsoft has faced these kinds of challenges with its Windows platform. Back in 2005, the company had no choice but to completely rewrite the system because it became too difficult to make upgrades!

Granted, this is probably not the situation with Apple software nowadays.  Over the years, the company has been able to innovate, such as with the launch of its Swift programming language. Apple also made it open source to allow quicker improvements.

But in today’s world, even small problems can lead to significant losses in the marketplace. Just look at AI, which is perhaps the most important trend in technology. And yes, it is all about developing advanced software.

As for Apple, its AI efforts have been mostly underwhelming. The Siri personal assistant is still glitchy, and the HomePod has languished. Meanwhile, companies like Google and Amazon.com, Inc. (NASDAQ:AMZN) have been capitalizing on the enormous market opportunity for AI.

Bottom Line on Apple Software

When it comes to growth, Apple software is likely to be the key driver. The main reason is that the smartphone market is fairly mature. So going forward, Apple will need to focus on services.

The good news is that the strategy has been working quite well. During the latest quarter, the services business posted revenues of $9.2 billion, up 31% on a year-over-year basis. Apple forecasts that this segment will double by 2020.

But again, Apple software will need to continually improve. Although, it is encouraging that the company appears to see this as a major priority. To this end, it plans hold back on announcing some new features at the WWDC (according to The Wall Street Journal).

It also looks like Apple will instead look at making enhancements and fixes to strategic products like Siri. All this shows that the company realizes that it must better prioritize features.

In other words, this year’s WWDC will probably not be as exciting as prior ones. But for the sake of the company’s future, this is probably a good thing.

Tom Taulli is the author of High-Profit IPO StrategiesAll About Commodities and All About Short SellingFollow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/06/does-apple-have-a-quality-problem-with-its-software/.

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