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Apple Acquired AuthenTec To Become The 'Champion Of Mobile Commerce' (AAPL)

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Last year, Apple (NASDAQ: AAPL) made a massive investment in fingerprint scanning technology.

Instead of spending a small sum of money to acquire a startup (which is very common for the company), Apple paid $365 million to acquire AuthenTec.

Before the acquisition, AuthenTec worked with companies like Hewlett-Packard (NYSE: HPQ) to deliver a full fingerprint scanning solution. The company's technology could also be found in Android devices.

Apple has not mentioned AuthenTec since it acquired the firm in July 2012. That could change next month when the iPhone 5S is unveiled.

"Apple wants to be the champion of mobile commerce," ABG Sundal Collier analyst Per Lindberg told Benzinga. "They probably want to integrate [fingerprint scanning] closely with the App Store. But that's why they bought AuthenTec last year. It's part of the strategy."

Lindberg is not convinced that consumers actually want a fingerprint scanner. But he feels that Apple will try to use its promotional power to persuade consumers.

Related: iPhone 5S Will Be Apple's "Most Successful Launch Ever"

"Apple is a marketing company more than anything else," said Lindberg. "I think they will try to give the impression that, 'Now we have a secure mobile payment solution, so come here and buy this device.'"

iOS 7: Another Apple Question Mark

While consumers may be willing to accept a fingerprint scanner in order to use the latest iPhone, Lindberg thinks that Apple's greatest challenge will be moving its "top-end clientele to iOS 7 without any hiccups."

Lindberg highlighted a few potential pitfalls for the mobile operating system:

  • Apple has drastically changed the visual interface.
  • Existing applications may not be instantly portable to iOS 7.
  • It could take developers extra time to adapt to the new OS.

Regarding the visual changes to iOS, Lindberg said that it is "far too early to say whether this is an improvement or a degradation of the user experience."

Despite his concern, Lindberg credited Apple for having an "amazing" retention rate. He estimated that the company was able to retain 80 percent of its customers whenever iPhone contracts expire.

Now that the iPhone 4S is approaching its second anniversary, there should be millions of consumers who are eager for an upgrade.

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

Latest Ratings for AAPL

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Sep 2014Pacific Crest SecuritiesDowngradesOutperformSector Perform
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Posted-In: ABG Sundal Collier Android Apple AuthenTec hewlett-packardAnalyst Color Analyst Ratings Tech Best of Benzinga

 

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