Rite Aid (NYSE:RAD) and CVS (NYSE:CVS) have disabled Apple's (NASDAQ:AAPL) mobile wallet system, Apple Pay, from working in their outlets across the U.S.
The reason wasn't immediately clear, the NYT reports, although it might have something to do with the drug retailers being part of MCX, a consortium of merchants that is developing an unfinished rival product called CurrentC.
A major question is whether other MCX retailers, which include Best Buy (NYSE:BBY), Gap (NYSE:GPS) and Walmart (NYSE:WMT), will also cut Apple, and/or whether consumers would revolt at such a move.
Apple has been working with MasterCard (NYSE:MA) on its system.
Apple's (AAPL +0.1%) global iTunes music download sales have fallen 13%-14% since the beginning of 2014, the WSJ reports. The decline is similar to the 12% Y/Y drop in 1H14 U.S. music download sales reported by the RIAA.
The paper adds Apple, which dominates the paid music download market, is responding with plans to launch a revamped version of the Beats Music subscription service that's a part of iTunes. That meshes with September reports stating Apple is thinking of getting rid of the Beats Music brand.
While paid downloads are dropping, the RIAA estimates 1H14 U.S. subscription music revenue rose 23%. Re/code has reported Apple is trying to get music labels to agree to price cuts that would enable a $5/month service, arguing $60/year in revenue would still be enough to offset any download revenue lost due to a subscription sign-up.
Apple's iTunes/software/services revenue rose 8% Y/Y in FQ4 to $4.6B, thanks to a 36% increase in App Store revenue. The company didn't break out music revenue.
An Apple spokeswoman: "Apple (NASDAQ:AAPL) put a lot of effort into an ambitious new sapphire manufacturing process with GTAT which is not ready for production. We're going to continue evaluating GTAT's progress on larger sapphire boule development, as well as consider other options for the facility."
GT Advanced (OTCPK:GTATQ +49.7%) confirmed this morning it has reached a settlement with Apple (previous) that will result in its Mesa, AZ and Salem, MA sapphire production ops being wound down, and that a portion of its sapphire furnace sales will be used to pay down the company's debt to Apple. 650 Mesa employees have been laid off.
GT "retains control of its intellectual property and will be able to sell its sapphire growth and fabrication technology, including ASF and Hyperion, without restrictions."
In a deal that GT Advanced (NASDAQ:GTAT) lawyer Luc Despins calls an "amicable parting of the ways," Apple (NASDAQ:AAPL) and GT have agreed to wind down Apple's Mesa, AZ plant, once expected to provide sapphire that would be used to protect millions of Apple device screens..
The plant's sapphire furnaces (owned/operated by GT) will be sold - Fortune's Philip Elmer-DeWitt reports 2,039 will be unloaded - and some of the proceeds used to pay down GT's debt to Apple. Apple made $440M worth of prepayments to GT that were structured as secured debt.
The deal suggests Apple will be turning to 3rd-party sapphire suppliers to obtain cover glass for the Apple Watch, which is set to ship in early 2015. The regular Apple Watch and the high-end Apple Watch Edition use sapphire cover glass; the Apple Watch Sport doesn't.
As part of the deal, GT is seeking to have the original court docs (currently sealed) that explained its bankruptcy filing struck from the public record. However, its lawyers state GT will be able to disclose most of the information that's pertinent to its bankruptcy.
"Gross margin guidance of flat (or up 50bps at the high end) vs a typical decline associated with the launch of new form factor products reinforces our thesis that the mix is gravitating strongly higher and should drive upside in revenues and gross margins," says BAML analyst Wamsi Mohan, reiterating a Buy rating with $120 price target, while boosting the fiscal 2015 EPS estimate to $7.97 from $7.86.
"Apple (NASDAQ:AAPL) indicated that iPhone may remain supply constrained through the end of the year even as the company is on track to exceed 100M iPhones in just 6 months," says Macquarie's Ben Schachter. "That is remarkable." He reiterates his Outperform rating and lifts the price target to $118 from $104.
Though FQ4 iPhone sales beat estimates, iPhone channel inventory is below Apple's (NASDAQ:AAPL) historical 4-6 week target range, the company disclosed on the CC. Apple is upping its target range to 5-7 weeks, but doesn't expect to reach it in FQ1. (live blogs: BI, WSJ)
As expected, a mix shift towards the iPhone 6 and the costlier/supply-constrained 6 Plus is boosting iPhone ASPs. "We're selling everything that we make," Tim Cook interjected during a question about product mix.
iPad channel inventory fell by 500K during FQ4. In spite of the 14% Y/Y drop in iPad revenue, Cook dismisses suggestions the market is saturated, noting over half of sales still go to first-time buyers. He did, however, admit consumers hold onto iPads (less likely to be sold with subsidies/installment plans) longer than they hold onto iPhones.
CFO Luca Maestri Maestri noted Apple, like many other U.S. companies, is dealing with forex headwinds caused by a strong dollar. He added forex is factored into FQ1 guidance.
Other details: 1) Apple bought 7 more companies in FQ4 (only 4 are known), bringing the FY14 total to 20. 2) App Store revenue rose 36% Y/Y. 3) Cook asserts Mac market share (previous) is at its highest level since 1995. FQ4 Mac revenue was 25% above iPad revenue. 4) Apple expects to open 25 new stores in FY15, ~75% of which will be outside the U.S.
Apple (NASDAQ:AAPL) had an FQ4 gross margin of 38%, +100 bps Y/Y and at the high end of a 37%-38% guidance range. FQ1 GM guidance is at 37.5%-38.5%.
Product line performance: iPhone revenue (56% of total revenue) +21% Y/Y to $23.7B, after growing 9% in FQ3; units +16%. iPad revenue -14% to $5.3B, after falling 8% in FQ3; units -13%. Mac revenue +18% to $6.6B, after rising 13% in FQ3; units +21%.
iTunes/software/services revenue +8% to $4.6B. Accessories +13% to $1.5B. iPods -28% to $410M.
Regional performance: Excluding retail, Americas revenue +17% to $16.2B (stronger than in recent quarters); Europe +19% to $9.5B (likewise); Greater China +1% to $5.8B; Japan +5% to $3.5B. Rest of Asia-Pac -3% to $1.9B. Retail +15% to $5.1B.
Helping margins: iPhone ASP rose to $603 from $561 in FQ3 and $596 in FQ2. iPad ASP fell to $432 from $443 in FQ3 and $465 in FQ2. Mac ASP fell to $1,200 from $1,255 in FQ3 and $1,334 in FQ2.
GAAP R&D spend +44% Y/Y to $1.69B. SG&A spend +18% to $3.16B.
$17B was spent on buybacks in FQ4, and $45B over the whole of FY14. Apple ended the quarter with over $155B in cash/investments, and over $35B in long-term debt and commercial paper.
Spotify is now offering family discounts: While the first family member signing up for its premium service pays the standard $10/month, each additional member pays only $5/month. "This is one of the most asked for features from our audience," says content chief Ken Parks.
Meanwhile, Re/code reports Apple (NASDAQ:AAPL) has been pushing music labels to agree to price cuts that would allow it to sell an overhauled Beats Music streaming service (previous) for just $5/month. However, the site suspects Apple doesn't think the labels will give in, and considers an $8/month rate a more realistic goal.
Pandora (P -1.9%) is lower on an up day for tech. Thus far, the company has done a decent job of staving off threats from subscription-based streaming services.
Spotify, still possibly eying an IPO, had 10M paid subs and 40M active users spread out over 56 markets as of May. Pandora had 3.5M active subs and 76.4M active listeners (mostly in the U.S.) at the end of Q2. Its Q3 report arrives on Thursday.
Not surprisingly, the iPad Air 2's (AAPL -0.9%) pricing starts at $499 (16GB Wi-Fi). As with the iPhone 6, Apple has doubled storage capacities for higher-tier models; 64GB and 128GB Wi-Fi-only models respectively go for $599 and $699. The original Air now starts at $399.
Very little time was spent discussing the iPad Mini 3. Moreover, while the Air 2 features (like the iPhone 6) 802.11ac Wi-Fi and an 8MP rear camera, the Mini 3 offers 802.11n Wi-Fi and a 5MP camera.
The Mini 3's pricing starts at $399, as expected. The Mini 2 (also has a retina display) now starts at $299, and (notably) the original, non-retina Mini is being kept around with a $249 starting price. The price points for the older models could help Apple grab some mid-range share from Android rivals.
A 27" retina iMac featuring an eye-popping 5210x2880 resolution (67% more pixels than 4K) has been shown off. "It's the world's highest-resolution display," declares VP Phil Schiller. The system is still only 5mm thick at its edges, and its display consumes 30% less power than its predecessor's.
Retina iMac models run on quad-core Intel (NASDAQ:INTC) Core i5 and i7 CPUs (3.5GHz.-4GHz.), and starts at $2,499. AMD (AMD +1.3%) is supplying a high-end Radeon R9 GPU. The 27" non-retina iMac will start at $1,799, and its 21.5" peer $1,099.
Apple is counting on its new iPads to spark a sales rebound: iPad revenue fell 8% Y/Y in calendar Q2 amid extended upgrade cycles and share gains for low-end Android tablets.
Analyst/Apple fan Ben Thompson recently argued the iPad has been hurt by softening developer support relative to the iPhone, along with the popularity of bigger phones and thinner/lighter PCs (such as the MacBook Air).
The iPad Air 2 (AAPL -0.6%) is only 6.1mm thick - 18% thinner than the original Air and 12% thinner than the iPhone 6. Official battery life is still at 10 hours.
As expected, Apple has added a Touch ID fingerprint sensor (supports Apple Pay), and an anti-reflective coating that reduces glare - Apple claims the lowest reflectivity of any tablet. The device runs on an A8X CPU said to respectively deliver 40% and 150% CPU and GPU performance improvements over the Air's A7 processor.
The Air 2 sports an 8MP rear camera, improved from the Air's 5MP camera. Slo-mo video (120 fps) and burst mode support has been added. The front camera has been updated to include a faster aperture and single-shot HDR support.
Investors aren't excited; shares have dipped slightly after previously trading near breakeven.
Apple Pay (AAPL - unchanged) launches on Monday, Tim Cook announces as Apple's iPad event gets underway. He add 500 more banks have given their support to the platform since it was unveiled last month.
The Apple Watch SDK (WatchKit) will roll out to developers next month ahead of an early-2015 hardware launch; recent reports have suggested a February ETA. Cook trumpets the device's fashion bona fides by noting its appearance on a Vogue China magazine cover.
OS chief Craig Federighi proclaims a "a flood of applications" have been written in Apple's new Swift programming language. He adds iOS 8.1 (rolling out soon) will bring Apple Pay support, along with a public beta for iCloud Photo Library.
Federighi also goes over Mac OS X Yosemite's feature set and performance/battery life improvements, as the OS gets set to roll out. 1M+ people have signed up for the public beta.
iPhone 6 NFC chip supplier NXP (NXPI +3.7%) is trading near the day's highs.
A hearing over GT Advanced's (NASDAQ:GTAT) request to shut down its sapphire manufacturing ops and keep many details about its Chap. 11 filing sealed that was originally set for today has been pushed back to Oct. 21, the day after Apple's (NASDAQ:AAPL) FQ4 report.
GT, Apple, and a committee of creditors agreed to the push-out. Also delayed: A ruling on Apple's objections to GT's attempt to free itself of certain contracts and leases.
Nonetheless, the day wasn't without fresh drama. Bankruptcy judge Henry Boroff grilled Apple over its extensive secrecy requests, questioning how much proprietary info was actually included in many of the docs it wants kept private. "I've got a foot-high stack of documents, and it can't be that it all must be sealed."
Boroff also provided a colorful analogy for the dispute between Apple and its would-be supplier. "I’m seeing what looks incredibly like a construction suit, where a homeowner says to the contractor, 'It didn't come out the way I wanted to,' and the contractor says, 'Well, it would have come out that way if you didn't continue to change the specifications.'"
Apple Inc designs, manufactures, & markets mobile communication & media devices, personal computers, & portable digital music players, & sells a variety of related software, services, accessories, networking solutions, & third-party digital content.