Apple wants you to upgrade to the new iOS 10 operating system. This is an investing article, not a tech article, so I'll leave out all the specifics of the new software and focus on one critical difference which is good for the stock, not the consumer. In the old days, Apple users were allowed to unlock their phone by "swiping right." Now, in the new iOS 10 software, the default setting requires you to press and hold the home button (circle at the bottom of the phone) to access your phone. Let's take a minute and think about why Apple would do that?
Apple Has A Problem iPhone Sales Are Declining:
Solution: Planned obsolescence
Apple has a problem: people do not "need" to upgrade or buy a new iPhone. That translates into slower sales and as a result, the stock stops going up. The stock has been stuck in a downtrend since hitting a record high $134.54 in May 2015. Investors are looking for a bullish impetus and have yet to find one. The stock has rallied nicely in recent months because investors were hoping that the new iPhone 7 and new Apple Watch will have enough of a wow factor to motivate people to buy new devices. So far, the data is mixed and consumers are not that excited about the new products. The consumer is asking, Why should I buy a new phone that costs ~$1,000 when I can use the one I have and it still works? So, Apple came up with a solution: planned obsolescence.
The Home Button Will Wear Out & People Will Buy New Phones At A Faster Rate. That Equals More Revenue & More Profit For Apple
So, if people won't buy your new product, why not make them buy a new phone by "breaking" their old phone? Genius, right? The home button is a normal button. It is not magical and it will wear out through constant pressing/normal wear and tear. Think about how many more times you will be "forced" to press that button each day just to access anything on your phone. How many more times each week, month, quarter, & year? Let's say you want to send an email, make a call, send a text message, or do anything else for that matter, you will have to "press" the home button just to get in. Then, once you are in, you will be pressing it a few more times while using your phone, and that adds up - FAST. As a consumer, I'm not happy with this upgrade but as an investor, I understand "why" they are doing it. The better, long-term solution, is to innovate but that is not something "easy" anyone can do. Until they come out with the "next big thing," consumers should expect more "planned obsolescence" to get them to "buy" more devices.
Bottom Line:
Apple is still a great story and has a great ecosystem. A few minor adjustments and you can easily see this under-valued stock take-off again.
