Tuesday, June 03, 2014, 07:42 am PT (10:42 am ET)
Wall Street expects Apple's WWDC announcements will leverage strength of connected platforms against GoogleWith Apple's annual Worldwide Developers Conference highlighting tight integration between the upcoming OS X Yosemite and iOS 8 platforms, market watchers on Wall Street saw the announcements as a direct shot at Google's competing Android platform.
Following the abundance of news at Monday's keynote presentation, analysts on Wall Street offered their reactions to clients via research notes. AppleInsider offers a roundup of the highlights below.
Analyst Rob Cihra took particular note of Apple's emphasis on user upgrades, as 89 percent of iOS users are running the latest version of iOS 7, while OS X Mavericks has been adopted by 51 percent of the Mac installed base. In contrast, just 9 percent of devices running Google's Android are running "Kit Kat," its latest version, while Microsoft's Windows 8 has just 14 percent adoption.
"This positions Apple to capitalize on unique levels of consistency/security/functionality attractive to users but perhaps even more so to developers," Cihra wrote.
Cihra, like many on Wall Street, was encouraged by WWDC, but is more excited about profitable new products from Apple expected to launch in the second half of 2014. In addition to new, larger iPhone models, he's also hopeful that Apple will debut an updated Apple TV that will be able to run third-party applications, as well as a wrist-worn "iWatch."
RBC Capital Markets
Analyst Amit Daryanani questioned whether Apple has placed Google squarely "in the crosshairs" at this year's WWDC. He noted that both iOS and Yosemite will use Microsoft's Bing, rather than Google to run native Spotlight searches for Internet content.
In addition, Daryanani said that Apple's newly announced and simplified Swift programming language could help ensure that applications written for iOS aren't as "easily portable," meaning they might stay exclusive to iOS and not appear on competing devices running Android.
Daryanani also believes that Apple's HomeKit and HealtKit application programming interfaces could be the building blocks for Apple to sell connected home devices and a so-called "iWatch" at some point down the road.
For Katy Huberty, Apple's keynote hinted at potential service opportunities the company could capitalize on. In particular, she's excited about the Touch ID fingerprint scanner being opened up to third-party apps, which she believes could pave the way for mobile payment services.
And improvements to iCloud, along with much cheaper storage options, could result in more meaningful services revenue for Apple, she believes. Huberty noted that while Apple previously charged $8.33 per month for 100 gigabytes of iCloud storage, its new plan is less than half that, at $3.99 per month, for twice the storage.
With at least 450 million iCloud users, Huberty believes storage upgrades represent a $5.3-billion-plus revenue opportunity for the company.
Like Huberty, analyst Gene Munster also believes there are future opportunities for Apple to monetize new services. Specifically, he mentioned HealthKit and HomeKit as ways that Apple could charge parters for building authorized "Made for iDevice" accessories that are compatible with the company's ecosystem.
Munster also sees the HealthKit tools as setting the stage for an "iWatch" launch later this year. He believes Apple will likely announce such a product around October, at an event after it introduces its next iPhone.
Cowen and Company
Apple's new software and services will bode well for long-term ecosystem lock-in, analyst Timothy Acuri believes. He was especially impressed by the "continuity" features that bring OS X and iOS closer than ever, including Handoff, AirDrop, and iCloud Drive.
"The increased integration between OS X and iOS is further evidence, in our view, that Apple will eventually move to collapse the new high-end tablet and notebook markets with a new product(s) and that iPhone is being further positioned as a drive of Mac/iPad sales," Acuri wrote.
Connectivity between iOS 8 and Yosemite, allowing phone calling and text messaging via a Mac, should help to lock users in to Apple's ecosystem, analyst Rod Hall believes.
And he believes that Apple's improvements to iCloud, including the addition of iCloud Drive, look better than competing services like Dropbox, thanks to the fact that background syncing is maintained across all Apple devices.
Wells Fargo Securities
Compared to other analysts, Maynard Um has been bearish as of late on Apple, with a "valuation range" for the company's stock of between $595 and $640. Following WWDC, Um said the keynote was a "slight disappointment" to him because of the lack of hardware announcements.
Um also said he felt Apple offered only a "cursory address" of its new home automation capabilities in iOS 8.
He did admit, however, that he was "encouraged" by the announcement of Apple's HealthKit and corresponding Health application, which he believes could allow the company to monetize user data analytics. But he also said that the transition to profiting off of this data would be "difficult."
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