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Apple Roundup: Kids Content, Repair Issues, Qualomm, Pay

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Apple (AAPL - Free Report) news from last week included its push into kids’ original programming, issues related to its repair and replace policy, a counter-aggressive measure in its patent infringement case versus Qualcomm (QCOM - Free Report) and more. Here are the details-

Push into Kids Content

Apple is partnering with Emmy award-winning television producer Sesame Workshop to create children's programming including live-action, animated and puppet series for its new streaming service. This is the first time it’s getting into children’s programming.

Sesame Workshop is best known for its "Sesame Street" programming, which aired on U.S. public television network PBS for nearly 50 years and now runs on HBO, with re-runs on PBS stations, but this hugely popular show isn’t part of the deal.

This is the second time in as many weeks that Apple announced a major content deal and underscores its services ambitions. Just last week, it signed on Oprah Winfrey to create "original programs that embrace her incomparable ability to connect with audiences around the world," likely outbidding competitors Amazon and Netflix.

Repair Issues

Apple was ordered by an Australian court to pay $9 million Australian dollars ($6.7 million) in penalties for refusing free repairs to users that had earlier gone to third parties for repairs. Australian law requires repair, replacement and even at times a refund when the product sold was faulty.

The problem started with at least 275 Australian customers being refused repairs between Feb 2015 and Feb 2016 for an Error 53 message on their devices. Apple earlier explained this was “an unauthorized or faulty screen replacement” message designed to protect users but later retracted the statement saying it was meant to be a factory test.

Whatever be the case, the Australian regulator’s investigation drove Apple to contact 5,000 affected customers and offer to compensate them.

Meanwhile in the U.S., Apple is promising its now-more-vigilant users that faulty MacBook and MacBook Pro keyboards will be replaced or repaired free of cost up to four years from their date of purchase, provided that the keyboards on select models have:

 -Letters or characters that repeat unexpectedly

- Letters or characters that do not appear when the key is pressed

- Key(s) that feel "sticky" or do not respond in a consistent manner

If you’ve already paid for repairs, Apple will refund your money.

The problem stems from a change in the keyboard design that incorporated a “butterfly mechanism” to make the keyboard 40% thinner and more responsive. It uses V-shaped underpinnings rather than the customary X-shaped scissor connection that however affects the way the keys function, especially because of the way dust or dirt is caught inside.

Qualcomm Fight Development

Apple has challenged four of the patents that Qualcomm accused it of infringing in a California federal court last year, saying that they didn’t cover new ideas.

The patents cover ways to automatically focus a digital camera; a device that functions as both a phone and personal digital assistant; touch-sensitive displays; and circuit memory.

Apple is in the habit of going to the Patent Trial and Appeal Board to cancel patents because it has an easier legal standard than courts do. In its current fiscal year ending Sep 2018, the company has filed 1,100+ such petitions.

Apple Pay Enters Norway

As promised at the last earnings call, Apple Pay has launched in the Ukraine, Poland and now, Norway. There are three supporting banks at launch including Nordea, Santander and Sbanken for customers with Visa cards. While it may not be a roaring success right at the start because of the high level of competition in the market, it is likely to attract Apple device users over time. With this launch, Apple Pay is now in 29 countries around the world.

Supplier News

Hon Hai Precision Industry is the Chinese company that assembles Apple devices, or that’s how it has been more popularly known for quite some time. And yet, the company is now showing signs that its dependence on the cyclical iPhone business is going down.

In 2017, around 51% of its revenues reportedly came from Apple, down from 54% in 2016. In first-quarter 2018, a weaker iPhone quarter, that revenue share is down to 45%.

One-Month Price Action

 

Recommendation

Apple shares carry a Zacks Rank #3 (Hold). Better tech plays include buy-ranked stocks like Microchip Technology (MCHP - Free Report) , Vishay Precision Group (VPG - Free Report) , Match Group (MTCH - Free Report) and Verint Systems (VRNT - Free Report) . Or, see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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