A smart TV, a new iPhone 5S, a smart watch and a new service centred on mobile payments. Apple is set to have a busy 2013. However, Apple CEO Tim Cook chose to remain silent on these developments and merely stated that Apple has been working on developing new hardware, software and other services in other categories which shall be released later this year or by fall 2014. When asked about Apple coming out with an iPhone with a display larger than 4 inches, Tim Cook said that because their competitors have already done this in the recent past, it is not likely that the company will follow suit.
According to Gene Munster from Piper Jaffray, the fact that Apple’s CEO stated that the company was looking to venture out into other product categories allows many analysts to speculate that Apple will release a television and a smart watch in the coming months. A new digital wallet in iOS 7 or 8 can be expected too. According to Amit Daryanani of RBC Capital Markets, Apple has a lot of advantages and disadvantages to look forward to. While better capital allocation will take place coupled with launches of new products, aspects like falling gross margins and delays in new launches might threaten to pull the company down. The increase in capital allocation, however, may overshadow the negatives because Apple will then be set to return to double-digit growth, especially with the iPad continuing to be a success.
Barclays Capital’s Ben Reitzes reported that Apple had issued guidance for $7 in EPS in the June quarter. This will help Apple in maintaining margins above the 36% level and will help enhance the stock’s strength by making it more appealing when the new product cycle begins in September. Apple announced to its investors that the company had cash reserves of $145 billion and that the company would more than double the cash-return program to the tune of $45 billion which the board had announced in March 2012.
Most of this is scheduled to go to the capital markets through share repurchase, because the company requires borrowing in order to cover costs of this expanded capital programme. Even though Apple has more than enough reserves to cover the repurchase, bringing back money parked overseas will turn out to be too costly, which necessitates borrowing.
