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Apple Loop: A $14 Billion Bet, A Sapphire iPhone 6, Flappy Bird Flies Away, Woz's Android iPhone

Feb 9 2014, 5:35pm CST | by

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Apple Loop: A $14 Billion Bet, A Sapphire iPhone 6, Flappy Bird Flies Away
 
 

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Apple Loop: A $14 Billion Bet, A Sapphire iPhone 6, Flappy Bird Flies Away, Woz's Android iPhone

Keeping you in the loop on just a few of the things that happened around Apple this week.

Apple’s big buyback. There are many reasons why CEO Tim Cook may have opted to reveal to the Wall Street Journal that Apple bought back $14 billion in stock in the two weeks since delivering holiday financial results that disappointed investors. But the big reason may be, as noted by the newspaper, that Apple “is fighting the perception that its best days are behind it.” Cook, who said he was “surprised” the company’s shares dropped 8 percent the day after reporting iPhone sales that fell short of Wall Street expectations, said the recent buyback brings the total Apple has purchased to more than $40 billion in the past year as part of a planned $60 billion buyback program. “It means that we are betting on Apple. It means that we are really confident on what we are doing and what we plan to do,” Cook said in a Feb 6 interview after returning from a trip to the Middle East . “We’re not just saying that. We’re showing that with our actions.” Cook gets to address investors at Apple’s shareholder meeting on Feb. 28, where they will vote on a proposal by billionaire investor Carl Icahn that the company return more of its $160 billion in cash back to shareholders (Icahn wants Apple to buy back an additional $50 billion in stock this fiscal year, ending in September and tweeted Feb. 7: “Keep buying Tim!). Cook told the WSJ that having cash on hand means having the flexibility to do a big acquisition — Apple has bought 21 mostly small companies in the past 15 months — or up its buybacks. “We’ve looked at big companies,” Cook said. “We have no problem spending 10 figures for the right company.”

New products, new categories. Cook also repeated what he told financial analysts on Jan. 23 — that Apple will move into new product categories this year. As usual, he didn’t say what categories those might be. “We’re not ready to talk about it, but we’re working on some really great stuff.” Icahn also had something to say about that, again via tweet: “Tim Cook again confirms $AAPL will launch new products in new categories (plural) this year. Wall Street apparently still not listening.” Well maybe they were listening a tiny bit. Apple’s shares closed up $7.14, or 1.4 percent, to $519.68 in Nasdaq trading on Feb. 7.

iWatch sales. And speaking of new products in new categories, Morgan Stanley adds to the list of estimates for how well the iWatch may sell. Analyst Katy Huberty predicts Apple could sell $17.5 billion worth of the smart device in the first 12 months — based on the user adoption rates of the iPod, iPhone and iPad among current Apple customers (there are 575 million iTunes/App Store accounts as of June 2013). “Our working assumption is that iWatch will largely be adopted as an accessory device and therefore sold into the existing customer base like the iPad rather than to new customers like the iPod or iPhone,” says Huberty, who is basing her estimate on a device with an average selling price of $299. “We see up to $17.5 billion of revenue in the first 12 months compared to $12 billion for the iPad and $2.5 billion for the iPhone. If there are supply bottlenecks in the first year, we see a more conservative revenue range from $10 billion (assuming iPhone penetration curve) to $14 billion (average of iPhone and iPad penetration curves). This translates into six to 10 points of revenue growth for Apple from iWatch in calendar year 2015.”

How likely is it that Apple will really deliver an iWatch? Well, if you don’t count the fact that they’ve already trademarked the name in several countries (though the name is held by others in the U.S., U.K. and China), Apple has already been hiring new executives who are reportedly working on the iWatch team (9to5Mac.com has been keeping track). The latest new hire is a reportedly Roy J.E.M. Raymann, a senior scientist from Philips Research who is an expert on sleep research and wearables. And there are also reports that Apple, which is working on new battery technology as you would expect,  could see create future versions of the iWatch charged via a solar-powered battery.

What’s with all that glass? When GT Advanced revealed that it had an agreement in which Apple prepaid it some $578 million to make sapphire crystal glass at a new factory in Mesa, Arizona, the speculation was that Apple might use the tough, but expensive glass in its rumored new smartwatch (Apple already uses sapphire glass in the camera modules in the latest iPhones). Sapphire glass has been deemed a bit pricey for a smartphone display, which is the most expensive component in the device (See iHS iSuppl’s bill of materials break out for the iPhone 5s here). Now comes word from 9to5Mac.com that Apple has purchased enough equipment to outfit the factory to make 100 million to 200 million, 5-inch iPhone displays using the stronger, highly scratch resistant glass — which it speculates could be used in the new iPhone 6. After looking through import/export records for the equipment — which includes ovens and testing machinery — 9to5mac.com concludes “the machines will allow GT Advanced to ensure that the sapphire crystal displays meet high-quality standards. These machines are specific for display-grade components, not small pieces of sapphire that could be used for Home buttons or cameras.” Check out all the documents they’ve found and see for yourself. But iThat glass be used to create larger-glass displays with curved edges for the iPhone 6, which will be released later this year if Apple continues its once-a-year updated schedule. The question is whether they’ll wait for September or go back to a June-July product intro for the new version of the iPhone? I’m betting they’ll release it earlier.

This isn’t the first time that Apple has paid out to outfit a supplier’s factory to ensure supply of the components it needs for its top-selling devices. Analysts have noted for several years now that Apple uses some of its overseas cash to pay suppliers advances so they can build new factories and guarantee supply. Here’s what it had to say about its capital expenditures in its 2013 annual report : The Company anticipates utilizing approximately $11.0 billion for capital expenditures during 2014, including approximately $550 million for retail store facilities and approximately $10.5 billion for other capital expenditures, including product tooling and manufacturing process equipment, and corporate facilities and infrastructure, including information systems hardware, software and enhancements.” In 2013, it spent $6.5 billon for “other capital expenditures, including product tooling and manufacturing process equipment, and other corporate facilities and infrastructure.” Even if it’s uses a few billion to cover the cost of the new circle-shaped campus currently underway in Cupertino, California, that’s still leaves a few billion for all those factory expenditures.

Is the pen mightier than the watch? The iWatch and iTV may get all the attention as the new category devices Apple will explore this year, but Patently Apple reminds us that Apple now has more than 22 patents for a stylus dubbed the iPen. “Apple’s invention generally relates to touch sensitive devices and, more specifically, to a modular stylus for use with touch sensitive devices. Further, this invention reveals modular styluses having a base module and one or more expansion modules. According to Apple, the base module could include a stylus tip, a stylus stimulation signal circuit capable of generating a stimulation signal, a processor for controlling the stylus stimulation signal circuit, and a connection interlace for selectively connecting the base module to one of the expansion modules.” Check out some of the patent filings that Patently Apple has unearthed.

Beware patent trolls. There’s nothing like a common enemy to bring rivals together. Apple and Google have joined together in asking the U.S. Supreme Court to allow them to strike back at what they believe to be are frivolous patent suits aimed at cashing on the companies’ success. They’re asking the court to make it easier to collect lawyers’ fees from patent-holders who lose the infringement suits. Notes Bloomberg , “For Apple and Google, change can’t come soon enough. Each has been sued more than 190 times in the past five years by “patent-assertion entities,” companies that get most of their revenue from patent licensing and enforcement, according to the research firm PatentFreedom. For every case that reaches court, Apple says, it gets dozens of letters demanding royalties… More than 100,000 companies were threatened in 2012 alone with infringement suits by businesses whose sole mission is to extract royalty revenue, according to a White House report. Those entities, dubbed “patent trolls” by critics, filed 19 percent of all patent lawsuits from 2007 to 2011, according to the Government Accountability Office.” 

Apple v Samsung, round three (or is it four? Five?) Apple and Samsung will face each other again in San Jose, California federal court starting March 31 for another round of fights over their patents. Foss Patents, which has been following the disputes here in the U.S. and around the world, posted the list of patents that each company says the other infringes on. Judge Lucy Kohn has forced each side to limit the number of patents they’re arguing over — Apple has five patents listed, Samung has four (the limiting was not a straightforward process and you can reach all about it here). As for products, the list covers 2012 and pre-212 products because “U.S. patent litigation is slow,” notes Foss Patent’s Florian Mueller. Meanwhile, Judge Koh last week also denied Samsung’s request for a retrial of the retrial of their case in August 2012. In November, Apple’s initial award from Samsung was reduced from more than ! billion to $929 million. The back-and-forth over that is complicated too, but if you want a break from watching the Olympics, you can read about it here .

An Android-based iPhone? Apple co-founder Steve “Woz” Wozniak has had a few crazy ideas in his time — including the technology that would become the Apple II — but this one might seem a little far-fetched for even the most die-hard Apple fans: Woz thinks Apple should make an Android phone. “There’s nothing that would keep Apple out of the Android market as a secondary phone market,” Wozniak said at a conference last week and in an interview with Wired . “We could compete very well. People like the precious looks of stylings and manufacturing that we do in our product compared to the other Android offerings. We could play in two arenas at the same time.” The Woz also dismissed critics who say Apple’s best days are behind it because it’s been slow to release new products in new categories. ““The great products really come from secret development,” he told Wired. “You put small teams of great people on them and they aren’t bothered by other people commenting on what they’re doing while they’re doing it. A whole new category of products doesn’t happen very often. It might happen once a decade. Sometimes you have to wait for one of those to come about.” He also praised Apple for not following in Samsung’s footsteps and loading the iPhone with new features because it can. “ “You pick up a Samsung phone and say smile and it takes a picture, but how much innovation is that? That’s just throwing in a lot of features,” he said. “People don’t really choose their smartphones based on features…I think Apple is superior at being able to say no.”

Flappy Bird can’t handle success. Flappy Bird creator Dong Nguyen has, as promised, removed the popular mobile game from Apple’s App Store. Nguyen, who tweeted that the press is over-stating the success of the game (though he  told The Verge that it was generating about $50,000 a day from in-app ads and it’s been at the top of the App Store rankings) doesn’t want to deal with the attention — and hype. First he tweeted “Please give me peace” to all those who wanted to talk about his success, and then said earlier this week he planned to remove the game. If you haen’t had a chance to play it, the objective is to have a tiny bird fly upward, avoiding hitting or getting sucked into green pipes. It’s way harder than you think, which is a big part of its appeal.) This weekend’s tweets by Nguyen it all. “I also don’t sell ‘Flappy Bird,’ please don’t’ ask.” “And I still make games.” Seems like sort of an odd ending to a successful app, and as Forbes contributor Paul Tassi notes, “It only deepens the mystery of a man who would simply erase the most popular game in the world because the reaction to it was bothering him.”  

Apple, The Simpsons and Futurama. This is for all the Apple fans out there (fanboy or not): TUAW has compiled a list of every Apple reference mentioned in The Simpson’s and Futurama. There are 43. Everyone can pick their favorites, but I laughed out loud again watching Homer and Lisa visit the Mapple Store in Season 20, Episode 7 of The Simpson’s. Says a store employee to Homer: “I see you’re admiring our MiCube. It’s fueled by dreams and powered by imagination.” Of course Homer wants one. Don’t we all?

That’s it. Hope you’ve had a good weekend.

 

If you missed my last issue of Apple Loop, you can find it here:

Apple Loop: ‘Great Things’ Coming, iPhone 6 Rumor Roundup, Jobs’ Biographer Says Google Rules, Mac Turns 30

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