Apple CEO Tim Cook at the 2019 edition of WWDC.
Courtesy AppleApple this week holds the first-ever virtual version of its Worldwide Developers Conference, an annual event that began in 1987. This year’s edition kicks off with Apple CEO Tim Cook’s keynote on Monday at 10 a.m. Pacific time.
This year’s WWDC is mostly a prelude to the bigger event later this year—the launch of the first 5G iPhones. Apple (ticker: AAPL) typically unveils new phones and other hardware in the fall. It uses WWDC to preview coming software across its ecosystem. It’s a big deal for all the developers that create iPhone and Mac apps.
But this year’s WWDC arrives at a complex moment for Apple and its developer community. In particular, there’s greater scrutiny around the 30% commission Apple charges for App Store sales.
Research firm Sensor Tower estimates Apple’s App Store has generated $15.8 billion in revenue during the current quarter, up 30% from a year ago. Consumers stuck at home are using the platform to spend more than ever on apps, subscriptions, and other entertainment.
Last week, the European Union launched an investigation of the App Store, with European Commission Executive Vice President Margrethe Vestager asserting a need to “ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers.” Piling on, Microsoft (MSFT) President Brad Smith called for regulators to take a closer look at “the nature of app stores, the rules that are being put in place, the prices and the tolls that are being extracted, and whether there is really a justification in antitrust law for everything that has been created.”
CEO Tim Cook is unlikely to weigh in on the debate directly next week, but he could use his keynote address to remind Apple developers about their importance to the company. He often points out how much developers have made through the App Store, and that point could be underlined at WWDC.
This past week, in fact, Apple announced a new study showing that the App Store ecosystem supported $519 billion in billings and sales in 2019 alone. The study casts a wide net and includes apps like ride sharing and food delivery, in addition to in-app ads and the sale of physical goods via apps.
Daniel Flax, senior tech research analyst at Neuberger Berman, an investment firm that owned more than $1.2 billion worth of Apple stock as of March 31, still sees a crucial role for Apple’s developers.
Flax points out that it’s the applications that usually differentiate Apple’s products. “Apple Watch was viewed by the market as DOA when it launched in 2015,” he says, but the watch has gained traction as Apple adjusted its strategy and pulled in new fitness and health-care applications.
Wedbush analyst Dan Ives expects to see a preview of iOS 14—the next generation iPhone software, including new virtual-reality features—during Monday’s event. And while the event is likely to be primarily software focused, there are reports that Apple will unveil a planned transition in its Mac product line from Intel -based chips to processors designed in-house.
On Friday, Jefferies analyst Kyle McNealy joined a parade of Wall Street analysts ratcheting up their expectations for Apple, which is now worth $1.5 trillion, or $350 a share. He reiterated his Buy rating and lifted his price target to $405, from $370, on high hopes for the 5G iPhone launch. But Apple stock fluttered on Friday afternoon and ended the day down after Apple decided to shut down 11 stores in four states because of a spike in Covid-19 cases. It was a late-week reminder that, even for Apple, the world is nowhere back to normal.
Write to Eric J. Savitz at eric.savitz@barrons.com
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June 20, 2020 at 08:08AM
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Apple WWDC Starts on Monday. It Could Get Awkward for Tim Cook. - Barron's
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