Apple’s Soft Launch for New Devices

June 6, 2014 Leave a comment

Apple’s Soft Launch for New Devices

DAN GALLAGHER

June 2, 2014 5:27 p.m. ET

Apple‘s AAPL -0.69% faithful were predictably wowed at its developers’ conference kickoff. The bigger test comes this fall once customers get an actual look at Apple’s new products.

That matters because, for all the focus on software in Monday’s opening keynote, Apple remains a hardware firm, using software and content to push sales of high-end devices at high margins. And with new designs like a large-screen iPhone and maybe a smartwatch expected in coming months, the question is how to maintain those margins.

It won’t be easy. Apple may have pioneered touch screen smartphones, but competition from the likes of Google, GOOGL -1.28% Microsoft MSFT -0.37% andSamsung Electronics 005930.SE +1.65% has forced it to raise the stakes to stay competitive.

Apple’s spending on research and development has averaged about 3% of revenue in the last four quarters against 2.4% a year before. It also took the unusual step of buying Beats for $3 billion, ostensibly to strengthen its streaming and hardware offers. It is budgeting about $11 billion for capital expenditures this year, much of it for tooling and other equipment used by its partners to produce Apple’s upscale designs, up from $9 billion spent in fiscal 2013.

Monday’s event was another good example of the investments Apple must make to stay competitive. It is adding dozens of new features to its iOS and OS X operating systems, along with launching a new programing language for developers. All of these will be free of charge as Apple works to keep its platforms appealing for developers to write games and other programs.

True to historical pattern, Apple’s shares ticked down after the announcement, but investors shouldn’t be disappointed. For Apple, software has become only the warm-up act. The main event comes later.

 

Filed under TMT Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment