Apple Launches Series of Updates at WWDC - Analyst Blog

At the ongoing Worldwide Developers Conference (WWDC) held in San Francisco, Apple AAPL unveiled a series of updates including iOS 8, OS X 10.10 Yosemite, Healthkit and a new programming language called Swift.

However, no new hardware was mentioned during the conference.

iOS 8 is equipped with a number of unique and improved features including revamped notification features, an upgrade to the keyboard's auto-correct functionality called QuickType; support for third-party keyboards, improvements to mail, and the much-rumored health tracking feature and companion app HealthKit.

Healthkit is Apple's new platform aimed at uniting health and fitness data from a wide variety of apps and services. It can act as an early-warning system that doctors can use to detect an unexpected spike in blood pressure or perhaps even a missed medication dosage.

Unlike in the past, Apple has opened up new elements of its iPhone OS such as its keyboard and cloud storage systems for external developers who can now create tools to customize these basic functions of the iPhone.

Apple opened up the iPhone to third-party apps way back in 2008. However, to date, only a handful of companies including Facebook FB and Twitter TWTR have been integrated into the basic functions of the iPhone's core software.

Some of the newly-introduced changes in iOS 8 bear a strong resemblance to what Google (GOOGL) has been doing for years with its rival smartphone operating system, Android.

OS X Yosemite, the sequel to last year's OS X Mavericks, is the upgraded version of the company's Mac Operating System.

The new OS includes a redesigned user interface much like iOS, as well as new features focusing on seamless integration between Mac and iOS devices and a new cloud storage system called iCloud Drive. The seamless integration between the phone and computer is something both Google and Microsoft MSFT could find hard to replicate, since Android has limited presence in computing and Windows has limited presence in smartphones. The convenience on the other hand is something customers could get used to, thus helping retention.  

During the ongoing WWDC, Apple also introduced a new coding language called Swift, which will be used by iPhone app developers going forward. The simplicity of the new language is believed to enable faster development of apps.

Reportedly, Apple has expressed its intention to launch a new platform that will transform devices running on the iOS mobile operating system into remote control for lights, security systems and other household appliances. The new platform will help Apple to expand its footprint in the emerging Internet of Things (IoT) market.

We believe Apple's foray into new industry spaces such as automobiles, home and healthcare is a major positive catalyst and will drive growth going forward. Moreover, the increased scope of operation will also help it to combat continuously increasing competition.

However, Apple's closest hardware competitor, Samsung, continues to frequently update its entire product portfolio, which has increased its popularity among buyers (both high income and low income level) over the last one year. In comparison, Apple's strategy of launching a yearly update of iPhone and iPad has not helped the stock much.

Conclusion

Traditionally, Apple has refused to divulge details about its product pipeline, which drove anticipation about its products. Although this secrecy has helped it to gain significant attention in the past (which also helped the stock price), we believe that the game is not exactly the same any more. Continuously updating bits and pieces right through the year and using the opportunity to display technological lead is what drives share prices today.

Moreover, while new products like a cheaper iMac, larger-screen iPhone, an iWatch or an updated Apple TV could be in the pipeline, we believe that it is high time that Apple provided some granularity about these products or at least provided a timeline for the launch. As long as Apple maintains secrecy, jittery investors will keep share prices under pressure.  

Currently, Apple has a Zacks Rank #3 (Hold).