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Apple Says Watch Has Connectivity Issues, Fix in the Offing

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Apple Inc (AAPL - Free Report) has acknowledged that its latest Apple Watch OS 3 Series has issues with cellular connectivity and assured that its engineers are working on the problem and the fix will be “soon” available with the future software release. Shares were down over 1.6% yesterday.

Apple’s comments came after several prominent reviewers lambasted the Watch for its repeated failure to connect to LTE. Apple had touted the built-in cellular as the USP of the Watch.

Lauren Goode of The Verge said that she persistently faced troubles connecting to cellular network. After having her first review unit replaced by a second unit by Apple, the problems remained. The “untethered” experience was intermittent. Plus, Watch seemed to connect to random wi-fi signals. Plus, Siri didn’t work smoothly. She was able to make calls manually via Watch but the battery drain was quick.

Apple Inc. Price

Apple Inc. Price | Apple Inc. Quote

Apple addressed these problems by saying, “that when Apple Watch Series 3 joins unauthenticated Wi-Fi networks without connectivity, it may at times prevent the watch from using cellular. We are investigating a fix for a future software release.”

The Wall Street Journal also pointed out similar problems with connection and a quick draining battery.

Though New York Times’ Brian Chen was relatively more positive about the Watch, he was perturbed by the fact that people will have to shell $10 for cellular connection even after paying $399 for the Watch. TechCrunch analyst echoed similar sentiments and said that though the Watch was good but given the issues with LTE connectivity now, it is but obvious there will be “serious deliberation” as far as buying is concerned as there will another $10 required to pay for cellular connection. .

Apple Watch OS 3 was said to be the “ultimate expression of Apple Watch” by the company’s chief financial officer, Jeff Williams. Powered by a new dual core processor, which is 70% faster than its predecessor, users can call, text as well as access GPS and third party applications like WeChat. Also, with integrated cellular and Apple Music, 40 million songs are available for streaming on your wrist, added Williams.

Apple Watch was launched in April 2015. Since then, the company has already become one of the leading players in the wearables market. Apple Watch sales were up 50% in the third quarter of fiscal 2017. Though a small fraction of the top line currently, Watch indicates Apple’s efforts to reduce dependence on iPhone. IPhone revenues constitute the major chunk of Apple’s revenues.

Apple began taking pre orders (watch with cellular) from Sep 15 and the device will be available from Sep 22 in nine countries including the United States, United Kingdom, Japan, and Switzerland in partnership with 14 carriers initially.

The watch which costs $399 will be available in a variety of colors namely gold, aluminum, silver and space grey. Users will have a range of bands to choose from including the sport loop. Watch Series 3 without cellular is priced at $329.

Zacks Rank and Share Price Movement

At present, Apple carries a Zacks Rank #3 (Hold). Notably, the company has outperformed the industry in the past year. Shares of Apple have surged 37.5% compared with the industry’s 36.5% increase.

Stocks to Consider

Better-ranked stocks in the broader technology sector include Applied Materials (AMAT - Free Report) , Activision Blizzard (ATVI - Free Report) and FormFactor Inc (FORM - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Applied Materials, Activision and Applied Optoelectronics is currently projected to be 17.1%, 13.6% and 16%, respectively.

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