Apple has not been held up as a cradle of innovation in Silicon Valley in recent years. The firm has gained a reputation for conservatism even as it dominates almost all consumer tech markets it has engaged in. Following Alphabet Inc into Glass probably won’t do the firm too many favors on that front.
Can we bet on Apple Glass?
Apple Inc. (NASDAQ:AAPL) has been focused on augmented reality for some time, but the tech is still in its early days. ARKit is included with the firm’s iOS 11 and will give developers the tools they need to build out AR apps. Whether or not the iPhone maker turns that into a new piece of tech remains to be seen.
At least one Wall Street analysts, however, is bullish on the possibility. Loup Ventures analyst Gene Munster reckons that such a device could make up 10 percent of Apple sales in 2022. Munster is known for his bullish predictions about products that don’t exist. His opinion then, is likely worth discounting to some degree.
Despite that, what he has to say may line up a future direction for Cupertino. Mr. Muster was very wrong about the financial impact of an Apple TV set, but he was right that it was being worked on in Cupertino.
In his view Apple will emerge with a pair of AR glasses in 2020. They will launch at the very high average price point of $1,300 initially, but that price will fall as adoption rises.
Cupertino won’t be the first firm to try an AR headset. Alphabet Inc (NASDAQ:GOOG), (NASDAQ:GOOGL) first showed off Glass, its head-worn device, in 2013. The tech never actually got a consumer launch.
That’s a worry for any technology that Tim Cooks engineering teams are working on. Many predictions about the impact of prospective tech from the company have been scuppered as roadblocks were hit internally.
Alphabet cars leave Apple far behind
The Apple Car is likely the best example of this. The automobile, which was billed as an all-electric self driving wonder, appears to have been essentially canceled in 2016. Since then the firm has taken a different tack and focused on autonomous systems.
This is the same path that has been followed by Alphabet Inc. The firm is now an old head in the self-driving car space, but its own vehicle designs never got off the ground. Now the firm is working on convincing a fleet of Chrysler mini-vans to drive themselves with software and sensors from Waymo, the company’s self-driving unit.
On Monday it was revealed that Apple had reached a deal with Hertz to lease a handful of cars. The Lexus SUVs are destined to become part of the firm’s self-driving experiments. At the same time, however, Alphabet Inc (NASDAQ:GOOG), (NASDAQ:GOOGL) announced a much more important deal with Hertz-rival Avis.
If the car project says anything about the firm’s Glass project, we’ll be waiting a lot longer than a couple of years for the firm to launch. Cupertino is nowhere near release on its car tech. There’s nothing to say that building out an attractive augmented reality ecosystem will be any different.
That even leaves aside the difficulty of producing attractive hardware. Google Glass wasn’t exactly stylish, and it may have failed as a result.
Why can’t Apple innovate?
It would be wrong to say that Apple doesn’t innovate. Qualitatively at least major changes have come to the iPhone since its release in 2007. Apple has also launched a bevy of services and software in the period.
What Wall Street is looking for, however, is something to complement the iPhone. Those holding Apple stock are worried that the next big thing will come from outside Cupertino’s walled garden. If the next big consumer technology craze cannibalized iPhone revenues that could be big trouble.
The most successful new product from Tim Cook’s firm in recent years is the Apple Watch. The firm says that sales of the device almost doubled over the last year. It has not, however, revealed exact numbers.
The best estimate we have comes from research firm Canalys. They reckon that it sold about 11.6 million smart watched in 2016. That’s a drop in the ocean compared to the 212 million iPhone units sold in the same year.
For now at least the Apple Watch is just a margin booster for the iPhone. Only the truly dedicated bother to buy it. It’s very far from the 10 percent of the firm’s revenue Gene Munster hopes to see come from the Apple Glasses.
Apple innovation may not be up to scratch
Analysts worry that Tim Cook is too traditional and reserved to innovate in a profitable way. That argument doesn’t do justice to the job Mr. Cook has done, however, and the amount of products he has built since being put in charge.
The argument that Apple hasn’t innovated is getting tired, and doesn’t really fit the paradigm we’re living in. Google hasn’t innovated beyond search since 1998, and Intel hasn’t innovated beyond micro-chips since the seventies. Right now Apple is a smart phone company, and it is far ahead of competitors in that world.
Apple is able to innovate, and it’s able to build huge businesses around its iPhone center. What it hasn’t been able to do, however, is move beyond the smartphone. Of course nobody else has managed that feat either. The Glasses are sure to be met with great skepticism, but betting on Apple falling behind is dangerous.
The future of Apple stock
Apple Inc. (NASDAQ:AAPL) is a cash generating machine, and Wall Street loves it. The year-on-year drop in iPhone sales bugged some investors last year. This year is different, however. Kulbinder Garcha, a Credit Suisse analyst, reckons that we’re headed for an iPhone Super-Cycle that will drive the firm’s shares to $170.
Apple stock relies almost exclusively on the sales of the iPhone. That’s what the firm is based on, and it’s not changing any time soon.
Apple Glasses are exciting to dream about, and Gene Munster sure does love to dream. The 10 percent revenue number is, of course, pure fantasy. There’s little point in holding an analyst willing to make five year product predictions to their word.
There’s so many moving parts in the prediction that a single order of magnitude margin of error is likely too small. For those holding onto Apple stock right now, the right psychology is to watch iPhone demand. All of the other factors, from the Car to Glasses are, from the perspective of a shareholder, essentially positive shocks that may or may not strike.