Tag Archives: Apple

Why Did Apple Ban Valve’s Steam Link From Its App Store?
May 25, 2018 6:04 pm|Comments (0)

Apple appears to be engaged in a battle of sorts with Valve.

In an interview with technology site Arstechnica, gaming company Valve said that Apple has removed and banned its Steam Link app from its App Store. The company said that Apple originally approved the app but after further review, found that it didn’t meet its approved guidelines.

Valve unveiled its Steam Link app earlier this month. The app allows you to stream your PC games from a computer to another device, as long as they’re both on the same network. The idea is for users to have a game running on one device but be able to play wherever they want in the home. It’s a relatively common feature with remote desktop apps that let users access another computer from their devices.

In its interview with Arstechnica, Valve said that it petitioned Apple’s ruling and pointed to those streaming apps, which are all available in the company’s App Store, as apparent proof that the Steam Link app isn’t in violation of the iPhone maker’s guidelines. Apple stood by its decision and kept the iOS app blocked from its application marketplace.

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For its part, Apple hasn’t publicly disclosed why it removed Steam Link from its App Store. The company also generally makes it a policy to not discuss specific details about why an app was removed or banned from its marketplace.

Apple did not respond to a Fortune request for comment on the Steam Link decision.

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Apple is almost a $1 trillion company, but watch out for Amazon
May 11, 2018 6:05 pm|Comments (0)

SAN FRANCISCO (Reuters) – Apple is on the verge of becoming the first $ 1 trillion publicly listed U.S. company, but even if it gets there, it could soon be overtaken as Amazon.com surges from behind.

FILE PHOTO – Tim Cook, CEO, speaks about Amazon during Apple’s annual world wide developer conference (WWDC) in San Jose, California, U.S. June 5, 2017. REUTERS/Stephen Lam/File Photo

Started in the garage of co-founder Steve Jobs in 1976, the iPhone maker’s annual revenue has ballooned to $ 229 billion, greater than the gross domestic product of countries including Portugal and New Zealand.

(Big Tech Rev vs Countries’ GDP: reut.rs/2ry9qr6)

Apple’s market capitalization on Thursday topped a record $ 934 billion, following its unveiling last week of a $ 100 billion buyback budget and news that Warren Buffett’s Berkshire Hathaway dramatically increased its stake in the company.

Thanks to a 12 percent rally since its quarterly report last Tuesday, the Cupertino, California company is just 8 percent short of hitting the $ 1 trillion valuation mark.

Pointing to Apple’s recent 31 percent jump in service revenue, including music streaming and online storage, CFRA analyst Angelo Zino on Wednesday upped his target price for the stock from $ 195 to $ 210, which would put Apple’s market capitalization at $ 1.03 trillion. Zino joins at least 12 other analysts with price targets putting Apple’s stock market value at 13 digits.

But Apple is in danger of being beaten to the $ 1 trillion mark – or passed soon after – by Amazon.com, the second largest listed U.S. company by market value, at $ 780 billion.

Saudi Arabian authorities, meanwhile, have said they expect a planned international initial public offering of Saudi Aramco that would value the national oil producer at about $ 2 trillion.

While $ 148 billion smaller than Apple on Friday, Amazon of late has expanded its stock price, and its sales, much more quickly than Apple. Amazon’s stock is red hot, trading recently at over 100 times expected earnings, compared to more-profitable – but slower growing – Apple’s valuation of 15 times earnings.

(Big Tech PEs:reut.rs/2wsd0YU )

Apple’s stock has risen 24 percent over the past year, fueled by optimism about the iPhone X, the company’s latest smartphone. But demand for the $ 1,000 device has underwhelmed investors, and bulls are now focused on Apple’s plan to return more cash to shareholders.

By comparison, Amazon’s stock has surged 70 percent over the past 12 months, bolstered by 31 percent revenue growth as more shopping moves online and businesses shift their IT departments to the cloud, where Amazon Web Services leads the market.

Amazon is also competing more with Apple and Google owner Alphabet as it sells music and video content, its Fire TV device and its Alexa smart home gadget.

(Big Tech Revenue: reut.rs/2wyZaE4 )

At $ 765 billion, Alphabet has the third largest market capitalization on Wall Street, with Microsoft close behind at $ 749 billion. Amazon breezed past both them both in February.

(Long-Term Market Cap:reut.rs/2rzCGxD )

Including Facebook, the five largest listed U.S. companies now account for 15 percent of the S&P 500’s $ 24 trillion market capitalization.

(Big Tech’s Outsized Weight in S&P 500: reut.rs/2rwBTOc)

To be sure, past stock gains are not a reliable predictor of future performance, and the surge in Apple’s and Amazon’s shares in recent years has been exceptional by most standards.

But if Apple’s stock were to keep growing at the pace seen over the past year, the company’s market capitalization would hit $ 1 trillion in September. Amazon would reach $ 1 trillion around October if its stock price continued to rise at the same rate as the past year, and overtake Apple soon after.

Extending forward their own one-year performances, Microsoft would not reach $ 1 trillion until early 2019, and Alphabet would take until 2020.

(Race to $ 1 Trillion Market Cap:reut.rs/2rz4WAJ )

Most Wall Street analysts are less optimistic. The mean analyst price target puts Apple’s stock 6 percent above current levels at $ 200 within the next 12 months, which would elevate its market capitalization to $ 983 billion, according to Thomson Reuters data.

The mean price target of analysts covering Amazon is $ 1,850, a 15 percent premium over its current price, which would give it a market value of $ 898 billion. Analysts target Microsoft to rise 12 percent to reach $ 845 billion, and for Alphabet’s market value to increase 16 percent to $ 884 billion.

(Big Tech Analyst Price Targets:reut.rs/2wv224H )

Reporting by Noel Randewich, Editing by Rosalba O’Brien

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Apple Watch Credited With Saving a Man’s Life
May 3, 2018 6:05 pm|Comments (0)

Apple Watch is being credited for saving a New York man’s life.

While he was working at his family’s bowling alley business Bowlerland last month, 32-year-old William Monzidelis became dizzy and started bleeding all over his body. Soon after, the Apple Watch he was wearing sent him a notification to immediately seek medical help.

On the way to the hospital, Monzidelis started to have seizures and by the time he arrived at the hospital just 30 minutes later, he had lost 80% of his blood, according to NBC New York, which earlier reported on the harrowing story. Emergency personnel discovered he had suffered an erupted ulcer and would need a blood transfusion just to have surgery to correct it. Doctors performed the surgery and he survived.

According to Monzidelis, who was interviewed by NBC New York, the doctors told him that if he didn’t receive the Apple Watch notification, he would’ve died.

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Although the Apple Watch isn’t classified as a dedicated medical device, it has an increasing number of features aimed at monitoring a person’s health. Chief among its health-focused features is a tracker that will monitor a person’s heart activity and alert them when something is off. When Apple Watch identifies a problem, it sends an urgent notification that tells people to seek medical attention.

Monzidelis’ story isn’t unique. Earlier this week, in fact, ABC News reported that the Apple Watch saved the life of an 18-year-old woman after it recognized that her resting heart rate had jumped to 160 beats per minute. She rushed to an urgent care and then an emergency room, where she was told she had kidney failure, according to the report. If not for the Apple Watch, she would have died, doctors apparently told her.

“Stories like Deanna’s inspire us to dream bigger and push harder every day,” Apple CEO Tim Cook tweeted this week in response to the ABC News article.

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Qualcomm's patent deals aim to ease Apple, regulator tensions, executive says
May 1, 2018 6:00 am|Comments (0)

(Reuters) – Qualcomm Inc has broadened its use of a lower-cost licensing model for the next generation of mobile data networks, a move that could help in contentious talks with two customers including iPhone maker Apple Inc, the wireless tech company’s patent licensing chief said on Monday.

FILE PHOTO: A sign on the Qualcomm campus is seen in San Diego, California, U.S. November 6, 2017. REUTERS/Mike Blake/File Photo

The patent business traditionally has supplied much of Qualcomm’s profit but has also spurred conflict with Apple, Samsung Electronics Ltd and Huawei Technologies Co Ltd as well as regulators in China, South Korea and the United States.

New deals could lower the licensing rate that Qualcomm receives while making the business more dependable if regulators view the terms favourably and two major customers – Apple and a company widely believed to be Huawei – resolve their disputes and resume paying Qualcomm.

“It’s a good context for dealing with the two licensee issues we have now,” Alex Rogers, the head of Qualcomm’s licensing division, told Reuters in an interview, naming Apple but leaving Huawei unnamed as is the company’s policy when a dispute hasn’t become public through a court proceeding.

Rogers did not comment directly on the likelihood of resolving either customer dispute. Apple and Huawei did not immediately respond to requests for comment.

Qualcomm sells chips for mobile phones but has a second, much older business licensing technology for wireless networks. The licensing business has generated global controversy and resulted in billions of dollars in regulatory fines, some of which remain on appeal.

Handset makers can licence one of two sets of Qualcomm patents: The full suite that costs makers about 5 percent of the cost of a handset or a smaller set of so-called “standard essential patents” for 3.25 percent, which includes only the patents needed for gear to work on mobile data networks.

In the past, most of Qualcomm’s customers licensed both sets of patents to avoid lawsuits. But Qualcomm has been defusing tensions by making it easier for customers to licence just the smaller, lower-cost set of standard patents and by adding patents for the next generation 5G wireless network to the suite at no additional cost.

That essentially extends a 2015 settlement with China’s chief antitrust regulator. Qualcomm began to licence only its standard patents for 3G and 4G networks to Chinese handset makers for a rate of 3.25 percent. More than 100 device makers have signed on for such deals.

“We have not lowered the rate. What we’re doing is including more technology, more (intellectual property) in the offering without increasing the price,” Rogers added.

Qualcomm also announced last week that it would assess its patent fees against only the first $ 400 (£291) of a phone’s net selling price. Rogers said the previous price cap was $ 500, a figure that was well known among industry insiders but that Qualcomm did not make public.

“What we’re doing here is creating a foundation for stability going forward,” Rogers said, describing Qualcomm’s 5G licensing moves as “regulator friendly”.

The question now is whether more handset makers will opt for Qualcomm’s lower-cost standard patents rather than its pricier full portfolio.

“What we perceive here is there will be more of a mix than there was in the past of companies opting for (standard essential patents) only,” Rogers said. “How much more, depends on each individual company.”

While Qualcomm has made no public disclosures about the status of talks with the two major customers in licence disputes, the company’s approach to licensing patents for upcoming 5G networks will look different than its initial approaches for 3G and 4G networks of years past.

“Both of those issues (disputes) are essentially now being handled within the framework of the current programme we’re offering,” Rogers said.

Reporting by Stephen Nellis; Editing by Peter Henderson and Cynthia Osterman

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Apple sensor supplier AMS warns of second-quarter slowdown
April 23, 2018 6:02 pm|Comments (0)

ZURICH (Reuters) – Chipmaker AMS reported first-quarter sales toward the lower end of its guidance range on Monday and warned of a downturn owing to weaker orders from one of its main customers.

FILE PHOTO: The logo of the multinational semiconductor manufacturer AMS (Austria Mikro Systeme) is seen during a annual news conference, in Zurich, Switzerland February 6, 2018. REUTERS/Moritz Hager

AMS did not name the customer, but the Austrian company is a big supplier to Apple, making components for the U.S. technology giant’s iPhone.

“We are not able to discuss the specific customer, but we are seeing significantly lower business from a large smartphones program and that is having a strong impact on the consumer business and the company as a whole,” said AMS head of investor relations Moritz Gmeiner.

For its second quarter, AMS said it expected sales to drop to between $ 220 million and $ 250 million, down from the $ 452.7 million in sales it reported for the first three months of 2018.

The downturn was based on weaker orders and lower forecast orders in the months ahead, Gmeiner said.

AMS added that changes in upcoming products, which prevented the pre-production of parts, mean that it also expects reduced utilization of factory capacity, which will hit profit margins.

The company, which also makes sensors used in cars and industrial gear, said the problem would be temporary and that preparations for ramping up production in the second half of the year remain on track.

FILE PHOTO: An iPhone X is seen on a large video screen in the Apple visitor centre in Cupertino, California, U.S., November 17, 2017. REUTERS/Elijah Nouvelage/File Photo

The Swiss-quoted company also confirmed its mid-term growth and profitability guidance, aiming for a 60 percent compound annual growth rate between 2016 and 2019, combined with an adjusted EBIT margin target of 30 percent from 2019 onwards.

First-quarter net profit rose to $ 99.9 million from a loss of $ 19.9 million a year earlier.

AMS shares have gained 8.1 percent this year, outpacing a Stoxx 600 Technology Index that has gained 0.7 percent.

The company’s stock has struggled of late, however, amid fears that Apple increasingly plans to use its own chips rather than buy them from third parties.

Weak results from Taiwan Semiconductor (TSMC) this month also spread concern about softer demand for smartphones.

Analysts have said that AMS obtains about 35 percent of its revenue from Apple, with mobile phone components making up the vast majority of its business with the U.S. company.

AMS supplies optical sensors that play a key role in facial recognition – one of the most distinctive features of Apple’s flagship iPhone X, which was introduced late last year and appears to have helped to drive AMS’s recent results.

Reporting by John Revill; Editing by David Goodman

Our Standards:The Thomson Reuters Trust Principles.

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TSMC's smartphone warning points squarely at Apple: analysts
April 19, 2018 6:05 pm|Comments (0)

(Reuters) – Shares in Apple Inc (AAPL.O) and its suppliers fell on Thursday after a raft of analysts read a prediction of softer smartphone sales from Taiwan Semiconductor Manufacturing Co Ltd (2330.TW) as driven chiefly by concern about demand for iPhones.

FILE PHOTO: A logo of Taiwan Semiconductor Manufacturing Co (TSMC) is seen at its headquarters in Hsinchu, Taiwan October 5, 2017. REUTERS/Eason Lam/File Photo

TSMC, the world’s largest contract chipmaker and a major Apple supplier, revised its full-year revenue target to the low end of its earlier forecast.

“Apple represents nearly 20 percent of TSMC’s revenue so the outlook potentially points to weaker-than-anticipated iPhone demand,” Atlantic Equities analyst James Cordwell told Reuters.

Others, some asking not to be quoted, said baldly that the warning was “exactly” about Apple.

Mizuho Securities USA said in a client note that its checks continue to point to soft demand for iPhone X, the Cupertino-based firm’s tenth anniversary phone released last November, in addition to a steady fall in iPhone 8 and 8 Plus orders.

Apple’s shares were last down 2.5 percent and were the biggest drag on the tech-heavy Nasdaq index.

Shares of Apple suppliers including Qualcomm Inc (QCOM.O), Intel Corp (INTC.O), Qorvo Inc (QRVO.O), Skyworks Solutions Inc (SWKS.O) and Broadcom Inc (AVGO.O) fell by 2 percent to 5 percent.

“Until the new iPhones in the Fall start driving the production food chain in Q3, mobile’s going to be weak,” Elazar Advisors analyst Chaim Siegel said.

TSMC, also a supplier to Qualcomm and Nvidia Corp (NVDA.O), said it expects growth this year of 5 percent for the global semiconductor industry, weaker than an earlier forecast of 5-7 percent.

Data provider TrendForce had earlier estimated 2018 global smartphone production at around 1.5 billion units, 2.8 percent up on 2017 but down from a previously expected 5 percent.

TSMC on Thursday estimated 8 percent growth for contract chipmakers, compared with its previous forecast of 9-10 percent.

U.S.-listed shares of TSMC (TSM.N) were down 6 percent, while other chip equipment makers such as Applied Materials Inc (AMAT.O) and Lam Research Corp (LRCX.O) fell about 5 percent and ASML Holding NV (ASML.O) lost 3.6 percent.

Another big industry bellwether, chip equipment maker Lam Research, said on Wednesday its shipments missed consensus estimates for the first time in five years.

Chipmakers Analog Devices Inc (ADI.O), Micron Technology (MU.O) and Xilinx Inc (XLNX.O) were also down by 3 percent to 4 percent.

Reporting by Sonam Rai in Bengaluru; Editing by Maju Samuel and Patrick Graham

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Apple Warns Employees to Stop Leaking Information to Media
April 14, 2018 6:01 pm|Comments (0)

Apple Inc. warned employees to stop leaking internal information on future plans and raised the specter of potential legal action and criminal charges, one of the most-aggressive moves by the world’s largest technology company to control information about its activities.

The Cupertino, California-based company said in a lengthy memo posted to its internal blog that it “caught 29 leakers,” last year and noted that 12 of those were arrested. “These people not only lose their jobs, they can face extreme difficulty finding employment elsewhere,” Apple added. The company declined to comment on Friday.

Apple outlined situations in which information was leaked to the media, including a meeting earlier this year where Apple’s software engineering head Craig Federighi told employees that some planned iPhone software features would be delayed. Apple also cited a yet-to-be-released software package that revealed details about the unreleased iPhone X and new Apple Watch.

Leaked information about a new product can negatively impact sales of current models, give rivals more time to begin on a competitive response, and lead to fewer sales when the new product launches, according to the memo. “We want the chance to tell our customers why the product is great, and not have that done poorly by someone else,” Greg Joswiak, an Apple product marketing executive, said in the memo.

The crackdown is part of broader and long-running attempts by Silicon Valley technology companies to track and limit what information their employees share publicly. Firms like Google and Facebook Inc. are pretty open with staff about their plans, but keep close tabs on their outside communications and sometime fire people when they find leaks.

Facebook executive Sheryl Sandberg last week talked about her disappointment with leakers. In 2016, Google fired an employee after the person shared internal posts criticizing an executive. The employee filed a lawsuit claiming their speech was protected under California law.

In messages to staff, tech companies sometimes conflate conversations employees are allowed to have, such as complaining about working conditions, with sharing trade secrets, said Chris Baker, an attorney with Baker Curtis and Schwartz, PC, who represents the fired Googler. “The overall broad definition of confidential information makes it so employees don’t say anything, even about issues they’re allowed to talk about,” he said. “That’s problematic.”

Apple is notoriously secretive about its product development. In 2012, Chief Executive Officer Tim Cook pledged to double down on keeping the company’s work under wraps. Despite that, the media has continued to report news on the firm to satisfy demand for information on a company that’s become a crucial part of investment portfolios, many of which support public retirement funds for teachers and other essential workers.

In 2017, Apple held a confidential meeting with employees in another bid to stop leaks. Since then, publications, including Bloomberg News, published details about the iPhone X, a new Apple TV video-streaming box, a new Apple Watch with LTE, the company’s upcoming augmented-reality headset, new iPad models, software enhancements, and details about the upcoming iPhones and AirPods headphones.

Here’s the memo:

Last month, Apple caught and fired the employee responsible for leaking details from an internal, confidential meeting about Apple’s software roadmap. Hundreds of software engineers were in attendance, and thousands more within the organization received details of its proceedings. One person betrayed their trust.

The employee who leaked the meeting to a reporter later told Apple investigators that he did it because he thought he wouldn’t be discovered. But people who leak — whether they’re Apple employees, contractors or suppliers — do get caught and they’re getting caught faster than ever.

In many cases, leakers don’t set out to leak. Instead, people who work for Apple are often targeted by press, analysts and bloggers who befriend them on professional and social networks like LinkedIn, Twitter and Facebook and begin to pry for information. While it may seem flattering to be approached, it’s important to remember that you’re getting played. The success of these outsiders is measured by obtaining Apple’s secrets from you and making them public. A scoop about an unreleased Apple product can generate massive traffic for a publication and financially benefit the blogger or reporter who broke it. But the Apple employee who leaks has everything to lose.

The impact of a leak goes far beyond the people who work on a project.

Leaking Apple’s work undermines everyone at Apple and the years they’ve invested in creating Apple products. “Thousands of people work tirelessly for months to deliver each major software release,” says UIKit lead Josh Shaffer, whose team’s work was part of the iOS 11 leak last fall. “Seeing it leak is devastating for all of us.”

The impact of a leak goes beyond the people who work on a particular project — it’s felt throughout the company. Leaked information about a new product can negatively impact sales of the current model; give rival companies more time to begin on a competitive response; and lead to fewer sales of that new product when it arrives. “We want the chance to tell our customers why the product is great, and not have that done poorly by someone else,” says Greg Joswiak of Product Marketing.

Investments by Apple have had an enormous impact on the company’s ability to identify and catch leakers. Just before last September’s special event, an employee leaked a link to the gold master of iOS 11 to the press, again believing he wouldn’t be caught. The unreleased OS detailed soon-to-be-announced software and hardware including iPhone X. Within days, the leaker was identified through an internal investigation and fired. Global Security’s digital forensics also helped catch several employees who were feeding confidential details about new products including iPhone X, iPad Pro and AirPods to a blogger at 9to5Mac.

Leakers in the supply chain are getting caught, too. Global Security has worked hand-in-hand with suppliers to prevent theft of Apple’s intellectual property as well as to identify individuals who try to exceed their access. They’ve also partnered with suppliers to identify vulnerabilities — both physical and technological — and ensure their security levels meet or exceed Apple’s expectations. These programs have nearly eliminated the theft of prototypes and products from factories, caught leakers and prevented many others from leaking in the first place.

Leakers do not simply lose their jobs at Apple. In some cases, they face jail time and massive fines for network intrusion and theft of trade secrets both classified as federal crimes. In 2017, Apple caught 29 leakers. 12 of those were arrested. Among those were Apple employees, contractors and some partners in Apple’s supply chain. These people not only lose their jobs, they can face extreme difficulty finding employment elsewhere. “The potential criminal consequences of leaking are real,” says Tom Moyer of Global Security, “and that can become part of your personal and professional identity forever.”

While they carry serious consequences, leaks are completely avoidable. They are the result of a decision by someone who may not have considered the impact of their actions. “Everyone comes to Apple to do the best work of their lives — work that matters and contributes to what all 135,000 people in this company are doing together,” says Joswiak. “The best way to honor those contributions is by not leaking.”

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Apple: Should You Be Worried?
April 12, 2018 6:10 pm|Comments (0)

As we approach Apple’s (AAPL) earnings report on May 1st, more and more negative news seems to be piling up. Data points suggest that a couple of key product categories are not doing well, and some are even questioning Apple’s capital return strategy. While I don’t think shareholders should be in all out panic mode just yet, I do think there are reasons to be a bit more cautious.

First of all, Apple’s fiscal Q2 report is the one time a year where management updates its capital return plan. This year, investors are expecting a lot considering US tax reform, repatriation, and the company’s plan to get to a cash neutral position in the future. While I’ll cover an expected dividend raise and buyback hike in the coming weeks, the bear camp seems to think that Apple will use a massive buyback to try to overshadow poor results. A buyback will help earnings per share, but if sales are struggling, some investors might wish the company made some acquisitions as well to help the top line.

Outside of the capital return update, I want to hear from Apple management if the battery replacement program is hurting iPhone sales. In my most recent article on the name, I discussed how one Street analyst discussed weak smartphone data out of China, and another analyst recently suggested that iPhone builds for later this year will be down quite a bit over last year:

Based on our channel checks with suppliers, we think current expectation for new iPhones production is ~80M–90M units for 2H18, below suppliers’ expectation of ~100-120M units for iPhone 8/X in early 2017.

After the bell on Wednesday, we also received the quarterly PC shipment estimate from IDC. As you can see in the table below, the research firm thinks that Apple’s sales were down almost 5% in calendar Q1, resulting in market share loss thanks to overall sales being almost flat. Apple also fell into 5th place for the fiscal Q2 period. While supporters will wait for official results from the company, I’ll note that last year’s Q1 estimate from IDC was nearly dead on to Apple’s result.

(Source: IDC article linked above)

Now I mentioned in a past Apple article that analyst estimates have been coming down, especially for the June quarter that we’ll get guidance for in a few weeks. Currently, analysts call for $ 52.31 billion in fiscal Q3 revenues, the lowest that I’ve seen and down nearly half a billion dollars in the past month. Reports of weak demand for the HomePod isn’t likely to help the situation.

Additionally, if I look at estimates for the March ending period to be reported, analysts are less than $ 200 million from Apple’s guidance midpoint. Don’t forget that guidance was weaker than expected to begin with. As the chart below shows, this is the second most bearish Street stance going into a report in the last two years. Dollar values are in billions, with the difference being the estimate compared to guidance midpoint.

*Current Street estimate, seen here. Guidance taken from quarterly reports on Apple’s financial information page.

While I still think Apple is a good long-term investment, there seems to be some concern building in the short term that could give investors some pause. IDC estimates that the company did not have a good PC sales quarter, and iPhone data might be coming in softer than expected. While an increase to the capital return plan will be nice, will it be enough to overcome potentially bad results?

As seen in the chart below, Apple has underperformed the Nasdaq so far this year, a trend that could continue if recent data points show growth is not coming in as hot as originally thought. Apple is less than 1% from its 50-day moving average, so if it breaks below that key level, it could trade down to the 200-day which by next week will likely be around $ 165.

(Source: Yahoo! Finance)

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Investors are always reminded that before making any investment, you should do your own proper due diligence on any name directly or indirectly mentioned in this article. Investors should also consider seeking advice from a broker or financial adviser before making any investment decisions. Any material in this article should be considered general information, and not relied on as a formal investment recommendation.

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Apple Music appoints new head, hits 48 million subscribers
April 11, 2018 6:01 pm|Comments (0)

(Reuters) – Apple Inc on Wednesday appointed a new executive to oversee its Apple Music streaming business and hit 48 million subscribers, the company said.

Apple said it had appointed Oliver Schusser as vice president of Apple Music and international content. Schusser, who joined Apple 14 years ago, will report directly to Apple senior vice president Eddy Cue and will also oversee Apple’s services outside the United States, including the App Store and iTunes.

Apple’s top streaming music rival Spotify Technology SA has 71 million so-called premium subscribers, a figure that includes users who have given the company a credit card number for a free trial. Spotify became a public company earlier this month after holding a so-called direct listing on the New York Stock Exchange.

On a comparable basis, the Apple Music service has 48 million subscribers, 40 million of whom are paying subscribers and 8 million of whom are on a free trial, Apple said. Both firms charge $ 9.99 a month for streaming music but provide discounts for student and family plans.

Variety magazine earlier reported the new subscriber figures and Schusser’s promotion. He previously built up Apple’s services businesses outside the U.S. in 155 markets, including China, Japan and Latin America, Apple said.

Apple’s services business, which includes Apple Music, the App Store and iCloud, is becoming increasingly important to the Apple’s financial outlook because the smart phone market has matured and iPhone sales growth has slowed. In its most recent quarter, Apple’s services business grew 18 percent to $ 8.4 billion, missing analyst expectations of $ 8.6 billion.

(This version of the story corrects paragraph 1 to Wednesday instead of Thursday)

Reporting by Stephen Nellis; Editing by Bernadette Baum

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Apple: Dividend Hike Ahead
April 9, 2018 6:07 pm|Comments (0)

Apple (NASDAQ:AAPL) investors have enjoyed many years of nice returns, albeit with some volatility along the way. The company is working hard on establishing itself as a reliable dividend grower as well as offering returns in terms of capital appreciation.

Rock-solid fundamentals, rising earnings and a huge cash hoard which is now being repatriated are all strong arguments for this stock to be part of any conservative dividend growth portfolio.

Chart AAPL data by YCharts

This chart basically behaves pretty much exactly the way you would want it to behave. Apart from a correction from mid 2015 to mid 2016 this stock has moved steadily from $ 61 five years ago until the current $ 168, a multiple of 2.75x. Adding in a dividend yield during that time of approximately 1.5% translates into an average annual total return of about 24%. Considering the sheer size of this company that is nothing short of impressive.

Apple’s Dividend History

Though Apple used to pay dividends back in the early 1990’s, I don’t really consider that relevant as the company was quite different back then. The relevant history starts in the summer of 2012. In August of that year the company started paying dividends again, at a split-adjusted quarterly rate of $ 0.38. The level was increased in May 2013 to a split-adjusted quarterly rate of $ 0.436. Ever since, a new and higher dividend has been paid each May.

Chart AAPL Dividend data by YCharts

The dividend is growing nicely and reliably each and every year. Between May 2013 and May 2017, when the dividend was last hiked, it increased from $ 0.436 to $ 0.63. That is 44% or an annual average increase of 9.6%. If we look at the last couple of years the annual rate of increase has been very close to this – at 10.6% in 2015, 9.6% in 2016 and 10.5% in 2017.

This trend suggests that the board targets a very consistent percentage-wise increase every year, where it sees through temporary ups and downs in its business. Comments from Tim Cook also suggests that consistency is a priority. Raises will continue to come, though probably not special dividends.

The payout ratio is not so consistent. It has always been comfortably low but has oscillated between 30% in 2014 to a low of 21% in late 2015 before reaching its current level of 26%. As payout ratios go this one is nothing to worry about. At triple the current level I would start to be concerned. Even with no earnings growth, they could continue hiking the dividend at 10% per year for many years to come.

Upcoming Dividend Hike

As mentioned above, May is the month the dividend has been hiked every year since 2013. In conjunction with presenting its first quarter results, the company also announces updates to its capital returns program. This year, it will present its first quarter results on May 1. This will be a very interesting day indeed.

First of all, investors will of course be interested in following the results from operations and how the iPhone X is doing. Further, particularly dividend growth investors will be following closely to see what the dividend hike will be. Lastly, people will want to know the size of the buyback program, the size of which will be decided both by the company’s results but also the amount of cash repatriated due to the new tax code.

Apple has said it will pay approximately $ 38 billion in a one-time tax to repatriate overseas cash. After paying that tax it will still have more than $ 200 billion left for either acquisitions, buybacks or dividends.

Considering that the underlying business is going quite well with EPS coming in at $ 9.21 in 2017, up 11% from $ 8.31 in 2016, the board has plenty of room to increase the dividend. With the payout ratio as low as it is I will consider a 10% hike as a floor.

Then we get to the upside. Though the company has tended to go for smooth dividend increases and funneling surplus cash to buybacks instead, the sheer size of the cash hoard now suggests that some of this will be channeled to dividends as well. The board must be comfortable that the new level will be sustainable and not be so high that it’s difficult to continue with 10% hikes in the years down the road. It is therefore unlikely to be a massive increase – it would make the board’s job harder down the line.

However, a hike which corresponds to the highest hike it has offered since reinstating the dividend, is quite possible in my mind. The highest increase it has had in recent history is the May 2013 increase of 15% to a split-adjusted dividend of $ 0.436. I believe such a hike is quite possible for two reasons. First, there is an expectation in the investor community that some of the massive cash hoard will go towards an extra large increase. Two, such an increase will not be so large as to make the board uncomfortable as to the sustainability of the dividend.

I therefore think the dividend will be hiked by 10-16% this spring for a new quarterly dividend of between $ 0.69-$ 0.73. I think it is more likely to be at the high end of that range rather than the low end.

Risk Factors

A constant risk for Apple is that a competitor will come up with a product that is vastly more appealing than its most important product, the iPhone. It has weathered competition very well so far, but in an innovative space like this, you never know when a new player comes along. After all, Nokia displaced Ericsson and Apple subsequently displaced Nokia in the mobile phone space. Another risk, as it is a global company, is fluctuation of currencies. An appreciating U.S. dollar will decrease foreign earnings when reported in dollars. Privacy has been on the agenda for some time and has really come to the forefront in recent weeks due to the Facebook (NASDAQ:FB) scandal. Some people are concerned about the possibility of having your health records on your iPhone. Apple has taken a clear stand on privacy but the risk of an adverse event and hence bad publicity will not go away.

Current Valuation

The analysis so far shows a rock solid company with a huge cash hoard and growing EPS. However, if the multiple is too high when you buy, even such a company may eventually turn out to be a bad investment.

In order to gauge whether Apple is reasonably priced or not, I will compare it to two global competitors, Samsung (OTC:SSNLF) and Microsoft (NASDAQ:MSFT).

Apple Samsung Microsoft
Price/Sales 3.8x 1.4x 7.5x
Price/Earnings 17.7x 8.9x 75.1x
Yield 1.5% 0.3% 1.8%

Source: Morningstar

First of all, Microsoft’s earnings multiple looks really high. The company posted a loss in the fourth quarter of 2017, which obviously skews the earnings multiple quite a bit. Even so, in addition to losing the Price/Earnings category, it also loses the Price/Sales category while actually coming out on top in the yield category.

Apple comes in second on Price/Sales, beaten by Samsung. Second place is apparently where Apple is supposed to be in this competition as that is the spot it lands in the two other categories as well. Considering the enormous cash level of Apple, I consider the stock to be quite attractive at these levels.

The analyst community expects Apple to turn out an average annual EPS growth rate over the next five years of 13.2%. If we assume that the multiple stays the same – not unreasonable as the multiple is at a decent level – and adding in the yield of 1.5%, we arrive at an expected annual total shareholder return of 14.7%. That has to be considered a nice expected return no matter what kind of investor you are.

At these levels this stock should be added by dividend growth investors, with an emphasis on growth. The current yield is not too impressive but the growth rate is solid and will likely be higher than normal this year. Further, given the solid fundamentals of this company, you can sleep well at night knowing the money will keep flowing in.

Conclusion

Apple is working methodically to establish itself as a reliable dividend grower. It has consistently increased its dividend by 10%, giving investors predictability. The strong underlying fundamentals together with a huge cash pile make it an almost certainty that this predictable dividend growth will continue for many more years to come. This year, due to the repatriation of overseas cash, the hike will likely be larger with a potential hike of almost 16% to $ 0.73. If you’re looking for a fat yield, there are probably better opportunities out there. If, on the other hand, you are a dividend growth investor looking for a high long term growth rate of the dividend, this stock should be in your portfolio.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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