It was an eventful week for Apple (AAPL - Free Report) , a week that included its purchase of a magazine subscription service called Texture, a news leak about its in-house development of MicroLED screens, a report about its sinking brand value, plus some usual ruckus about its business practices, fines and taxes in Europe. Here are some more details-
Apple Acquires Texture:
In a bid to further grow its software and services business that Apple expects will deliver $50 billion in annual revenue by 2021, the Cupertino-based company has bought Texture.
Texture is an online magazine subscription service available through the Apple and Google app stores and also on Amazon.com (AMZN - Free Report) . It offers a monthly subscription to 200 magazines including Vanity Fair, Esquire, National Geographic, Sunset, Fortune, Entertainment Weekly, Billboard, Vanity Fair, Vogue and Bloomberg Businessweek for $9.99 a month. CEO John Loughlin reportedly said in a 2016 interview that the business had "hundreds of thousands" of subscribers.
It was owned by Next Issue Media, a joint-venture between publishers Condé Nast, Hearst, Meredith, Rogers Media that raised $40 million and other investors including KKR, BuzzFeed, Vox Media and Imgur that raised another $50 million. As may be expected, because of its size, Apple didn’t mention what it paid for the company.
Apple has been gaining ground in the news distribution space. At the SXSW conference, its SVP of software and services Eddie Cue said that users of its existing News service follow more than 20 publications, up from four a couple of years ago. "We are committed to quality journalism from trusted sources and allowing magazines to keep producing beautifully designed and engaging stories for users," he said.
Taking a dig at the Alphabet (GOOGL - Free Report) and Facebook (FB - Free Report) business models he added, "We're not after trying to keep getting you to read the same thing over and over again to sell ads…For ourselves, when we got into this we thought when you have a large platform there's a lot of responsibility — and we've always taken a great deal of responsibility for our platforms."
Apple Making Own Screens
A Bloomberg report on Apple developing MicroLED screens in its own facilities in California and Taiwan sent its display and related component suppliers Samsung, Sharp, LG Display and Japan Display down last week.
The technology is far from commercialization and may take at least two more years to make it to an Apple Watch, from where it might move to bigger screens like the iPhone. MicroLED is superior to OLED screens used in many smart devices today in that it enables thinner, brighter, more power efficient and more durable screens. It also allows engineers more control over pixels. But the technology is very difficult and expensive to develop.
Apple is reportedly trying to keep the displays away from its component suppliers for as long as possible while it tests them on its Watches. It doesn’t however have mass manufacturing capacity yet, so it may eventually pass it on to manufacturing partners, either in Asia or in the U.S. where its partner Honhai is building an LCD display facility.
Apple Brand Reputation: The annual Harris Poll Reputation Quotient ranking saw Google and Apple drop to number 28 and 29, respectively from number five and eight in 2017. Tesla (TSLA - Free Report) was the top gainer, going from number nine to three while Amazon was the strongest positioned, retaining its number one position for the third straight year.
As pointed out by Forbes’ Ken Kan, Apple is widely believed to have dropped down in the rankings because of the battery issue that saw it reduce speeds of older iPhones through a software update. This spurred mistrust among users, many of whom thought it was an inducement to buy the newer pricier varieties. Apple’s discount on battery price couldn’t undo the damage. Apple falling behind in the HomePod because of relatively slower development of Siri could be another reason.
France to Sue Apple and Google: French Finance Minister Bruno Le Maire said on RTL radio that he expects to bring a lawsuit against Apple and Google for the way they run their online app stores. He took particular exception to the fact that French developers are not allowed to negotiate with the companies but have to agree to pay out 30% of their sales or 15% of subscriptions.
And even after that, the tech companies can unilaterally change agreements or remove their apps from the app store without their consent. They also can’t take the matter to court because they are made to sign a contract agreeing to these terms.
"When developers want to develop their apps and sell them through Google or Apple, those companies set the prices, Google and Apple get back some data,” Le Maire said. "All of this is unacceptable, this isn't the economy that we want." He continued, "I'm going to take legal action against Google and Apple with the Paris Commercial Court for abusive business practices." A Google spokesperson said that they didn’t believe they were in violation of French law and looked forward to making their case in court. Apple didn’t comment. The fine could be a few millions, which would be a drop in the ocean for both.
EU Digital Tax: The large technology companies with global revenues of 750 million euros ($930 million) or more are in for some special treatment for the European Union. The executive committee of the EU has said that it is in process of framing rules that will require these companies to pay a tax of 1-5% of their revenue (IBD says it’s 3%) instead of their profits.
The EU is especially targeting online market places, search engines and app stores that serve as intermediaries between European companies and their customers. So companies like Alphabet’s Google, Facebook, Amazon, Apple, Amazon and eBay (EBAY - Free Report) would all be subject to these taxes on their advertising revenue, when they share data to third parties and when buyers and sellers pay a fee to connect on a digital platform.
While the rules will need to be approved by all 28 member states and could therefore see hurdles in countries like Ireland, it could still effectively be in force if independent countries like France and Germany decide to adopt it. The post-Brexit UK is in its favor and will likely adopt a similar law.
Apple Music Users Touch 38 Million: At the South by Southwest festival in Austin TX, Eddie Cue, Apple’s SVP of Internet software and services said that Apple Music subscribers now number 38 million, up from 36 million in February. That’s about half the 71 million paid subscribers that market leader Spotify has, most likely on account of its having been around much longer.
It is, however, much more than Amazon Music Unlimited, which has 16 million paying subscribers and Pandora (P - Free Report) , which has 5.48 million total subscribers. Google Play Music doesn’t disclose these details, so a comparison isn’t possible. All the services charge $9.99 a month except Amazon, which offers the service as part of its Prime subscription of $7.99 per month that also includes shipping, video content and other perks.
Apple WWDC in San Jose June 4-8: Apple will be hosting its 29th conference for developers at the McEnery Convention Center in downtown San Jose. Some of its announcements are currently speculated to be iOS 12, macOS 10.14, watchOS 5, and tvOS 12.Up to 350 WWDC Student Scholarships are available this year.company engineers will hold more than 100 sessions with developers on new technologies to be announced. Developers can apply for tickets costing $1,599 each now through March 22 at 10 a.m. PDT via the WWDC website.
Wistron Buys Land in India: Apple Supplier Wistron Infocomm Manufacturing India Pvt Ltd's application for 43 acres of land, roughly 65 km from the tech hub of Bengaluru, has been approved by the government of Karnatala state in India as the initial demand for 50-100 acres couldn’t be met. The land will be used to build assembly lines for smartphones, Internet of Things (IOT) products and bio-tech devices at a total development cost of $105 million.
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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