Sunday, June 9, 2013

WWDC And The Importance of iOS 7

On Monday, 10 June, the annual gathering of Apple's developers kick's off with CEO Tim Cook's keynote speech at 10:00 PST in San Francisco's Moscone Center.

As usual, there is a huge amount of excitement surrounding the event, and rumours of what might or might not be announced have dominated the tech news for the last few weeks. Being a developer's conference, the focus is on software, rather than hardware. Few expect new iPhone or iPad announcements, although Apple might use the event to preview updates to the MacBook line, with updates to the Haswell line of processors most likely. There might even be an announcement regarding the US manufacture of a new, and long overdue Mac Pro. An announcement regarding the release of OS X 10.9 is also expected, but the changes will be more likely be evolutionary, rather than revolutionary.

Apple and Wall Street
From a high of 705 in September 2012, after the launch of the iPhone 5, the Apple share price plummeted to a low of 385 in April of this year. Since the announcement of the share buy-back scheme, the has been some improvement, and the shares are trading in the 440 - 450 band this week. This is enough to still make Apple the most valuable tech company in the world, with a market cap of over $415bn.

One of the main reasons for this high value is the above average margins Apple makes on its products. In March 2012 Apple's gross margin was 47,37%, but this fell to 37,5% by March 2013 (link). However, Apple's net profit for the year ending March 2013 was $39,5bn, compared to $38,5bn for the previous year (link). So, despite a reduced profit margin, net profit increased. This is due to the increased sales of Apple products, as they push into more and more markets around the world.

So why the volatility in the share price? Analysts are nervous that the iPhone and iPad, Apple's two main sources of revenue, are losing their appeal. If sales drop off, the net profit falls, as there is little to no room to increase margins.

The Importance of iOS 7

The real importance of iOS 7 will therefore be how Apple adds value to the ecosystem that has grown around the iPhone and iPad, and convinces the buying public to continue paying a premium for Apple products. In short, Apple needs to add new features that will retain its current users and attract new customers.

iOS today looks almost the same as it did back in 2007 when Steve Jobs announced the iPhone more than 6 years ago in the same venue. As competition in the segment has grown, other smartphone manufacturers have added widgets and newsfeeds to their home screens, and the iOS grid of icons has grown stale. One update that we might see will be an update to Notification Center, and the inclusion of more widgets, beyond the weather and stock ticker. There has been a lot of speculation about Sir Jony Ive's "flattening" of iOS and the move away from skeuomorphism (digital interfaces that replicate the physical look), and the "modernisation" of iOS will be a very welcome move.

Key new features could include the facilitation of mobile payments through Passbook, the free but ad supported "iRadio" music streaming service linked to iTunes, and possibly the release of more API's for Siri and iCloud to developers, which could lead to the development of new apps that take advantage of these features.

One More Thing

Steve Jobs was famous for his "one more thing" announcements in his keynote speeches. While Tim Cook is unlikely to copy his predecessor exactly, there is also speculation that Apple might announce a move into "wearable" technologies, perhaps the "iWatch".

I am also hopeful that Apple's "hobby" project, the Apple TV, might get some love. Opening that platform up to developers would be a big move, especially for the gaming community.

Thanks for reading.