Apple week in review via Goldman Sachs: Apple Inc. (NASDAQ:AAPL) plans to split orders to new suppliers, Apple plans to source its orders from 2 to 3, Walmart drops iPhone 5 price to $129, 4S for $39, and Apple Inc. (NASDAQ:AAPL) has added a section to its iOS 7 developer website focused on business customers.
Apple Inc. (NASDAQ:AAPL) plans to split orders to new suppliers (DigiTimes, June 26, 2013)
Apple Inc. (NASDAQ:AAPL) Summary:
DigiTimes reports that Apple plans to source its orders from 2 to 3 suppliers, instead of just 1 or 2. The company is said to have invited Wistron and Compal Communication to join the manufacturing roll, though no official announcements have been made. According to DigiTimes, the shift is meant to increase the flexibility of Apple’s operating model. The sources indicate that new suppliers are unlikely to start delivering orders until 2014 or 2015, since Apple requires partners to establish independent production lines for Apple work.
One drawback of Apple’s highly focused supply chain strategy has been that new product launches often run into supply constraints that take months to clear out. This has especially been the case for products that push the boundaries of the design envelope, such as the iPad. Apple may be able to mitigate some of this supply chain volatility with the addition of new partners, though as the report suggests, it is unlikely we will see any near- or medium-term effects from such a change.
Wal-Mart Stores, Inc. (NYSE:WMT) drops iPhone 5 price to $129, 4S for $39 (AppleInsider, June 22, 2013)
Apple Inc. (NASDAQ:AAPL) iPhone 5 summary:
Wal-Mart Stores, Inc. (NYSE:WMT) announced that it would reduce the prices of the iPhone 5 and the iPhone 4S. The price of the iPhone 5 will be $129, from $189, and the price of the iPhone 4S will be $39, from $89. The prices are contingent on customers signing up for a new two year contract with AT&T Inc. (NYSE:T), Verizon Communications Inc. (NYSE:VZ), or Sprint Nextel Corporation (NYSE:S).
Goldman’s take: Walmart is among the most affordable providers of the iPhone 5, and joins other retailers in increasing incentives for would-be iPhone buyers. Best Buy Co., Inc. (NYSE:BBY) recently reinstated its iPhone trade-in program as well. Running through the end of June, it will give customers trading in an iPhone 4 or 4S up to $150 off an on-contract iPhone 5. Apple is also reportedly planning to launch a trade-in program of its own. While we believe such incentives could help spur upgrades between now and the launch of the next iPhone (which we still expect this fall), it does suggest that Apple Inc. (NASDAQ:AAPL)’s ability to spur demand for the iPhone 5 has weakened further as the next product cycle approaches. Nevertheless, we had already factored this risk into our estimates.
Apple promotes new iOS 7 features aimed at enterprise customers
Summary: Apple Inc. (NASDAQ:AAPL) has added a section to its iOS 7 developer website focused on business customers. The new section promotes new features that will be of specific interest to enterprise customers, related to areas such as security and mobile device management. For instance, iOS 7 will allow businesses more control over company documents, which can be kept within corporate applications. iOS 7 will also support VPN (virtual private network) on an app-by-app basis, and companies will be able to configure apps to automatically connect to VPN on launch. With a new App Store Volume Purchase Program, businesses will be able to assign apps to users while maintaining ownership and control over the licenses.
Goldman’s take: The growing enterprise support for iOS has been noted by the press and by Apple itself. The iPhone and iPad enjoy broad support from top Fortune 500 companies, many of which have also joined the iOS enterprise development program. We view Apple as well-positioned to make inroads in the enterprise, although this customer base is slow to change and subject to additional technical requirements. We believe these enhancements to iOS 7, however, could enhance Apple’s business appeal and boost enterprise adoption over time.