Even people who are not familiar with gadgets/smartphones/tablets etc know iPhones/iPads. iPhones/iPads are synonymous to smartphones/tablets for most people. That’s how ubiquitous the Apple brand is. Being the largest company (in terms of market cap) doesn’t hurt either. That’s one of the reason, Apple occupies more than its fair share of coverage in the media as well as among the common people in spite of being a tech company.
But lately the last couple of years, the company has been going through tough times, even though it has bounced back in the couple of quarters. With the smartphone market saturated in the developed markets and competition from Google/Android, Apple has not been able to sustain the same growth rate as experienced during 2008-2011. After hitting a high of $100 (post split) in September of 2012, the stock hit a low of around $56+ in June of 2013. Analysts were skeptical of whether Apple would be able to bounce back and improve its product lines and increase growth. Of course since then the stock has bounced back to almost its lifetime highs of close of $100. Few reasons include:
- Apple showed increased iPhone sales during the last couple of quarters.
- In the meantime, Apple has also started paying out dividends (since mid 2012) and has already increased it twice. At current prices, it yields about 2%. Also with a payout ratio of less than 30%, it has room to increase the dividends even more.
- Also, they have also announced significant buybacks to reduce outstanding shares which will also help to increase the EPS.
- A 7 for 1 stock split was announced and took effect earlier this year.
Towards the end of last year, Apple CEO Tim Cook in an email to all his employees promised a great 2014 year for Apple including introduction of “several” new products. As a shareholder of Apple, I was excited on the promise of new products. With the iPhone/iPad sales stagnating, Apple has to come with new product lines to maintain its growth rate that the market is expecting.
Earlier this year, Apple introduced the next version of iOS with new features including Health monitoring and home automation. But this is not going to add much to the bottom line. New versions of iPhones and iPads are due to be released later this year during their usual time frames. But from my perspective, new versions of iPhones/iPads doesn’t count has “new” products. These are just yearly refreshes needed just to keep up with the competitors.
With more than half of 2014 gone, I am still waiting for the promised “several” new products. Couple of products that are being rumored include:
- iWatch – This product has been rumored for a couple of years now and not there are strong indications that this will be introduced this year. We will have to wait and see if this happens and also how much it will contribute to the bottom line.
- Apple TV set top box: A new and refreshed Apple TV set top box to compete with the likes of Roku, Amazon TV and so on. Of course unlike iPhones/iPads where the hardware provides much of the profits, profits from Apple TV (if introduced) would depend on selling content and not the hardware itself.
- With the Beats acquisition, there are opportunities to add revenue through the beats headphones/speakers and beats music. Maybe other hardware lines are planned for the future.
So other that what I have above, I am not sure if any more new products are going to be launched this year. So I am not sure what Tim Cook meant by “several” new products. Apple is due to report its 3rd quarter results later this week and can provide more information on the future plans.
As a shareholder, I am keenly awaiting the launch of the promised new products which will enable the company to maintain its growth and increase its dividends for years to come.
Disclosure: Long on AAPL, GOOG