Yesterday's Apple Inc. (NASDAQ:AAPL) event was called the most underwhelming Apple Inc. event in recent history. The three main highlights in my opinion are as follows:
- The Apple Watch is $50 cheaper than before.
- The 4-inch iPhone SE is the most affordable new iPhone ever.
- The 9.7-inch iPad Pro is three inches smaller than its predecessor.
There were lots of other small detail and data points the company articulated during the event, but the key product takeaways according to the bulk of the company's sales model are mentioned in the bullet points. Having said that, let's discuss the new and highly anticipated iPhone SE.
iPhone sales growth is slowing and there is no denying this point of articulation. During the last quarterly reporting cycle, the company reported the slowest rate of iPhone growth in the product's eight-year history. According to FactSet, many analysts are forecasting the products first ever YOY decline for the iPhone in the upcoming quarterly release.
The iPhone SE has basically the same iPhone 6 innards but with a much smaller screen and price point. The dimensions are almost exactly the same as the iPhone 5s. The new, smaller model will include an NFC chip for Apple Pay. The new iPhone SE camera also will see upgrades with a 12-megapixel sensor and the ability to capture 4K video. This is the same camera you've seen on the iPhone 6s and 6s Plus. With that camera comes the ability to capture and view Live Photos, Apple's GIF-style feature that captures a couple seconds of video before and after the picture is taken to result in a moving, video-like final product. Unfortunately, there is no 3D touch with the new and smaller iPhone SE.
Alongside the new iPhone SE, iOS 9.2 launches and will ship with the little iPhone SE. It includes Night Mode, which changes the coloring and brightness of the display to better suit your eyes in the evening/night and early in the morning. It also will include password-protected (TouchID) Notes, app suggestions in Health and more customized News.
iPhone SE will commence sales with a base price of $399, the lowest starting price for an iPhone ever. This price point objective is an obvious and smart attempt by Apple Inc. to boost sales without diminishing the quality of the iPhone product. Pre-orders will begin this week with shipments to launch at the end of the month.
With the iPad exhibiting eight straight quarterly volume declines, Apple's latest iPad Pro is smaller than its predecessor at 9.7 inches.
The iPad will retail for $599 versus the $799 starting price for the 32-gigabyte iPad Pro. The new iPad, which comes in place of an updated MacBook Air, has an A9x chip, just like the 12.9-inch iPad Pro, and 12-megapixel camera, versus 8 megapixels for the larger iPad Pro. Much like the iPhone SE being smaller in stature and price point, Apple is betting on smaller and less expensive variables with the latest iPad Pro. It remains to be seen whether or not this maneuver will impact sales. I'm of the opinion that smaller and cheaper is not the most relatable issue with iPad sales, but rather the ability of the product to satisfy consumer needs for optimal size and price.
I will get into the Apple Watch in just a bit, but before doing so I would like to introduce some immediate responses to the Apple Inc. event via Twitter (NYSE:TWTR) tweets during the event. Please see below:
Funny that when Apple has exciting new products to announce, it doesn't spend 30 minutes talking about the environment and health.
The SE in iPhone SE stands for So Expensive.
201 Retweets 116 likes
#1 smartwatch in the world, but we're dropping the price by $100, because we definitely, really sold more than 17 Apple Watches#AppleEvent
As displayed in the last tweet, Apple did announce a repricing of the Apple Watch and while some are of the opinion this is a simple forecasting and operational move toward a new Apple Watch, I would very much be of a differing opinion. Apple Inc. boasted the Apple Watch as being the No. 1 selling smartwatch on the market today. But this recognition and boasting fails to identify how the product is selling to actual consumers. It is one thing to get the Watch into retailers as the retailers are quick and eager to adopt anything with the Apple Inc. logo on it, but it has been an entirely different challenge to get the Watch into the consumer's hands. The sell through of Apple Watch is dreadful and the repricing is less of a foreshadowing of the future Watch to come than it is a needs-based decision to alleviate inventory from retailers. It has been widely reported that the Apple Watch has failed to woo the consumer the way other Apple Inc. products have done in the past. With that said, I would expect the next version of the Apple Watch to exhibit an entry level price akin to the newly repriced Apple Watch at $299.99.
Unfortunately, Apple Inc. didn't discuss much about the Apple Watch to come and the necessary improvement to the watch. One thing the company did discuss that was related to the efficacy of the smartwatch device was a new developer kit called CareKit. The CareKit is a developer kit for apps designed to better track both minor and chronic health conditions, from keeping track of medications to managing Parkinson's disease. What I like about this developer kit and how it can be used is that it fits the desired usage for the wearables category. In a recent article I authored, I specified the main reason for consumers purchasing smartwatches/wearables was for health and wellness/fitness applications.
The main push or marketing of wearables is the health and fitness aspect of usage and it is easier to wear than carry a smartphone.
It appears that the next Apple Watch will have more health and wellness applications through the employment of CareKit. With the ability to share information with doctors, nurses or family members, CareKit apps help people take a more active role in their health. Here's what the company had to say about CareKit more directly:
"We're thrilled with the profound impact ResearchKit has already had on the pace and scale of conducting medical research, and have realized that many of the same principles could help with individual care," said Jeff Williams, Apple's chief operating officer. "We believe that giving individuals the tools to understand what is happening with their health is incredibly powerful, and apps designed using CareKit make this a reality by empowering people to take a more active role in their care."
Additionally, CareKit (here) will be released as an open source framework next month allowing the developer community to continue building on the first four modules designed by Apple, that include:
• Care Card helps people track their individual care plans and action items such as taking medication or completing physical therapy exercises. Activities can automatically be tracked and entered using sensors in Apple Watch or iPhone:
• Symptom and Measurement Tracker lets users easily record their symptoms and how they're feeling, like monitoring temperature for possible infections or measuring pain or fatigue. Progress updates could include simple surveys, photos that capture the progression of a wound or activities calculated by using the iPhone's accelerometer and gyroscope, like quantifying range of motion.
Look, all of these features and applications sound and look like great features on the surface, but the practicality of these applications may be a "bridge too far." Tracking medications via an app is a great idea, but so was the pillbox that is a simple, easy to open container with date indicators. Are there more people willing to push several buttons on a phone or watch, upload data, track the data and record actions taken than to simply take a medication as we have always done historically and more simply? Applications are great if they simplify a task and I'm not sure the CareKit offers simplification to the mass consumer marketplace.
I have serious and expressed doubts concerning the Apple Watch, regardless of the enhanced features and especially if the device remains tethered to duplicate operation systems and devices. One critic to the Apple Watch tweeted the following during the Apple event yesterday:
Here's some improvements for Apple Watch, but none of them are what it really needs: much faster hardware and revamped software.
Much like the iPad mini and existing iPad pro lineup of products, the Apple Watch simply doesn't fit a need in the consumer's life and the practicality of the product doesn't advantage itself beyond its predecessor products. This doesn't mean Apple can't sell billions of dollars worth of Apple Watches as evidenced by reported volumes, but it does mean that investors should more deeply consider the YOY results for the product going forward. Early adopters are easy to capture and selling products into retailers are equally as easy. But like the iPad, the Watch will need to show long-standing YOY growth to prove itself of greater value to the investment community.
The Apple event yesterday didn't amount to much although Apple and their investors do hope to see improved profit and sales performance from some of these key product initiatives. Shares of AAPL didn't change much during the daily trade yesterday and investors are now more focused on the stock's improved performance as of late. With the overall market moving into positive territory over the last several weeks, shares of AAPL also have bounced off of their recent lows as indicated in the chart below:
Presently, I'm of the opinion that a "wait and see" approach to investing in shares of AAPL is optimal. The macro-environment is challenging enough without having to compare YOY sales for the company's flagship iPhone product. Additionally, while the service side of the Apple business is growing it still doesn't have the capacity to offset any shortcomings from the hardware side of the product portfolio business segment.
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.