- Virtual and Augmented Reality seen as potential next growth avenue for Apple
- Apple also filed a headset patent earlier this year and Apple CEO Tim Cook is on record as believing VR isn’t niche and that he sees “interesting applications” for its use
- Given early VR / AR leadership from Oculus Rift, Microsoft HoloLens, and Samsung, Apple may look to jump into the space soon to drive its next stage of growth
From the Nasdaq article:
Once the darling of Wall Street, Apple now has investors and consumers questioning whether the company’s best years are behind it. Apple is now two weeks removed from reporting its fiscal first quarter earnings when it missed tremendously on the top line. A majority of this can be attributed to slowing demand of the recent iPhone 6s. After the runaway success of the iPhone 6, many investors believed the newest iteration would perform just as well, which was clearly not the case. Consumers have been reluctant to purchase the iPhone 6s pointing to its failure to make significant changes from the previous version.
Since the iPhone accounts for 70% of Apple’s revenue, phone sales have a huge impact on which way the stock moves. In the past, the iPhone’s ongoing success has been able to mask the cracks in Apple’s otherwise declining products. iPad sales have slowed down due to minimal upgrade demand and the release of the Apple Watch came with mixed reactions. As the smartphone market reaches saturation, Apple can no longer rely on iPhone sales to carry earnings. A growing amount of evidence has investors believing Apple is developing virtual reality technology.
What we know right now, Apple will be releasing annual upgrades to products in its ecosystem this year. This includes the highly anticipated iPhone 7, which is expected to set a new precedence for iPhone sales. Rumor has it, the new phone will be fully waterproof and without a traditional 3.5mm headphone jack. Additionally, there are rumblings that the phone will incorporate a dual lens camera, fundamental to augmented reality. Including this feature is Apple’s first indication to developing virtual reality technology.
Otherwise, Apple plans to release updates to the iPad, MacBook and Apple Watch which should provide a boost on the top line. With Apple now guiding a YoY decline in revenue for its fiscal second quarter, a mid-cycle launch could potentially help return growth to the company.
Virtual reality has been a dream of consumers for decades and now companies are capitalizing on the technology to make this a reality. Facebook, Samsung, and Google have been pioneers in the industry, preparing to launch their respective VR products later in 2016. By some estimation, virtual and augmented reality is forecasted to hit $150 billion in sales by 2020. AR/VR technology could be the next big thing investors have been waiting for from the company.
Apple’s recent acquisitions and initiatives suggest the company has begun developing virtual reality technology of its own. In the past 5 years, Apple has acquired 4 separate companies, all which specialize in technologies related to virtual reality. Just this past week, Apple purchased Flyby Media, a company that specializes in mobile augmented reality technology. The move follows a slew of Apple hiring’s and job openings directly associated to an Apple virtual reality headset.
Most importantly, Apple filed a headset patent earlier this year. Apple files patents on a continual basis that never materialize into real products, but given the other evidence, the patent seems significant. Moreover, CEO, Tim Cook reiterated the company’s stance on virtual reality, stating “I don’t think VR is a niche,” and “I think it’s really cool and has some interesting applications” after Apple’s earning call this past month.
It’s no surprise Apple is showing up late to the virtual reality trend. Historically, Apple has used its marketing prowess and strong ecosystem to catch up and even surpass the industry standard. That said, Apple might not want to wait around too long before it officially jumps into AR/VR.
Early growth in this sector is expected to be driven by tech giants like Facebook, Google, Microsoft, and Samsung. As Apple looks for more opportunities outside of the iPhone, a headset VR system could be the ideal pairing to the phone that jump starts growth. Even though no one expects the company to release a VR product until 2017, investors and consumers can look forward to the highly anticipated iPhone 7 and string of other upgrades this year.