Per a Bloomberg report, Apple Inc. (AAPL - Free Report) is mulling venturing into the wearable headsets space, underscoring CEO Tim Cook’s focus on Augmented Reality (AR). The report added that the Cupertino behemoth is unlikely to initiate “mass production” as it has just ordered a small number of near-eye displays for testing purposes from a supplier.
Media reports have likened Apple’s efforts to that of Alphabet’s (GOOGL - Free Report) failed project Google Glass. Initially called Project Glass, Google Glass was unveiled in 2012 and marked Alphabet’s foray into the wearable technology space. It however ran into trouble, given its exorbitant price tag and for being a social nuisance. The in-built camera in Google Glass was capable of video recording without anyone noticing, thereby causing a massive social outrage.
However, analysts observe that Apple will take serious note of privacy concerns, especially after the Glass fiasco, if it intends to dive into the wearable technology space.
Apple is under tremendous pressure to introduce new products, as it’s most important growth driver – the iPhone– faces falling demand, observes Bloomberg.
iPhone alone contributed about 60% of Apple’s total revenue in the fourth quarter of fiscal 2016. However, since the last two quarters, the demand for these devices has been soft owing to global macroeconomic weakness especially with currency volatility and declining commodity prices in some key regions across the globe (about 60% of Apple revenues come from International markets).
In the recently reported quarter, Apple iPhone unit sales came in at about 45.5 million, down 5% year over year. Revenues from iPhone also declined 13% from the year-ago quarter to $28.2 billion. The company has also been seeing slowdown in demand from key regions like China, which, if it continues, can significantly impact Apple’s financials going ahead.
At its third quarter fiscal 2016 earnings conference call, Cook had emphasized the company’s AR efforts for the first time. Technologies such as AI and AR/VR are fast emerging as lucrative business opportunities. According to a recent IDC report, global revenues of the AR/VR market are expected to grow at a CAGR of 181.3% from $5.2 billion in 2016 to over $162 billion in 2020.
All tech giants right from Facebook (FB - Free Report) to Microsoft (MSFT - Free Report) are scrambling to grab a share of this lucrative market. Facebook had acquired Oculus in 2012 to fuel the company’s ambitious VR efforts. At its Oculus Developer conference held last month, Facebook announced another $250 million investment to develop a VR content ecosystem. It also announced some new products including Santa Cruz, a cheaper standalone VR headset with inside-out-tracking. Earlier this year, it launched its VR headset, Rift. In March, Microsoft started shipping its AR headset, HoloLens.
At present, Apple has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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