CEO Tim Cook was on stage at the Steve Jobs Theater in Cupertino, California. In the past week, the use could not have been higher. Investors, consumers and reporters waited for evidence that Apple's transformation into a service company was finally underway.
Was Apple successful (ticker: AAPL)? Not exactly. Cook, who recently embraced the Tim Apple nickname, sounded more like Timid Apple when he unveiled an indefinite series of streaming TV programs, along with new news, credit and gaming efforts.
Appetite's timidity is a problem because the excitement about the new service strategy has caused a rally of 30% since its January low.
After Wall Street projected a double-digit percentage decline in iPhone sales this year, Apple made a concerted effort to highlight the service story. In January, the company announced that it has 900 million active iPhones and 1.4 billion active devices. The information should focus investors on the large and still unused Monetarisierungsmöglichkeit Apple.
On Monday, however, Apple introduced a series of incremental services that even disappointed Apple fans.
This is from the point of view of presenting and narrating one of Apple's weaker events, "said James Wang, an analyst with ARK Invest, whose firm manages $ 6 billion and owns Apple shares, in a telephone interview on Tuesday. "None of these services is very compelling and differentiated from competitors."
The biggest drawback was perhaps the small and vague details for the Apple TV + Video subscription. Apple welcomed a parade of celebrities on stage, but had little actual content to show, and the service offered no value.
Rodman's Goldman Sachs analyst seemed stunned by the lack of progress and timing of the event.
"Apple's services were significantly different than we expected," he wrote Monday in a note. "We were surprised that Apple announced the launch of a video service in the fall, and not earlier, without pricing information being provided at the event."
Apple has already spent more than $ 1 billion, the New York Times reportedly has a dozen year-end shows. With other estimates of total content spend up to $ 2 billion, Apple is not in the same universe as the market leader
(NFLX). Bank of America Merrill Lynch estimates that Netflix's total bill this year could be $ 15 billion, and the Netflix website lists more than 900 original shows.
Force the Question – What is Apple worried about? Slowly and tentatively, the needle does not move for a company with a market capitalization of $ 900 billion. With net cash flow of $ 130 billion (cash minus debt) in the balance sheet and annual earnings of over $ 50 billion, Apple has tremendous financial resources to compete.
Apple has not responded to a request for comment on content issues or questions about the size of its investments.
Apple's reluctance also became apparent with its new Apple Arcade game initiative. The subscription service provides access to about 100 games, mostly from a smaller budget, artistic and independent. The main idea is that unlike the now-popular transaction model in the game, the platform will provide all-you-can-eat games.
"Apple Arcade will most likely turn out to be a niche service," says Serkan Toto, game industry analyst, Kantan Games. "With smart devices, free-to-play remains king." Apple Arcade, he says, "is mostly just a new take on curation and pricing."
Perhaps the transition to software and services was damned destiny based on core competencies.
"At its core, Apple is an experience company powered by hardware, operating systems, and ecosystems, not services," said Patrick Moorhead, Chief Analyst at Moor Insights & Strategy.
Apple's meager entry into gambling a week later
The unit Google (Google) has grown big, revealing an ambitious game service based on the cloud.
Apple is also active in banking and on television from behind. It has a branded credit card that most consumer-oriented businesses already have, and Apple TV Channels, which allow users to subscribe to third-party streaming services like HBO in their app. This feature essentially mimics what Amazon Prime Video has been doing since 2015.
Most importantly, Apple's recently announced service offerings will not contribute to the profits, says Goldman's Hall.
"Although all these services are interesting from one company From the point of view of platform migration, nobody seems to have a significant impact on earnings per share in the short term," he wrote.
Wang Wang of ARK Invest is concerned that Apple may have sacrificed its identity by appeasing Wall Street. "On the one hand, I see how they really satisfy Wall Street and demonstrate the financial model. On the other hand, I'm a little bit worried that they're losing their core DNA, namely building great products that do not exist "to create markets, rather than compete in markets," he says.
Last week, this column indicated that Apple investors may wish to take profits due to high hopes for service usage. The special event was more disappointing than expected. Apple shares fell 1% last week, even though the S & P 500 index has gained more than 1%. Now that investors are focusing more on Apple's declining iPhone business again, the risk is that all profits in 2019 could ease off.
Write to Tae Kim at [email protected]