Apple Inc. (NASDAQ:AAPL) has been a success story for most investors over the past few months with stellar offerings across the board in terms of sales, earnings and growth prospects. While the bulk of investor attention goes to the last quarter’s earning, which beat estimates, but failed to sell the massive and ever-increasing number of iPhones that analysts on Wall Street expected the Cupertino-based tech giant to push this year.
The negativity surrounding Apple post-earnings has effected the stock strongly, which, as a result, fell significantly. The stock currently trades at about $114.55 in the market at the time of writing this piece, down more than $16 from its pre-earnings position. The perceived disappointment that the market has in Apple stock, has sparked yet another debate as to where the market stands on Apple’s massive cash hoard. While most agree that Apple should return the stock directly to its shareholders, others feel that Apple might very well be wasting its massive brand value and market position by focusing on what are arguably stagnating markets (Smartphones and Macs) and failing to make meaningful contributions to the rest of what is a significantly promising market.
Apple’s cash hoard is estimated to be somewhere around $200 billion, massive enough to buy just about everything the Cupertino-based tech giant has on its shopping list. The move with HBO Now coupled with Apple music essentially means that the tech giant is more than just contemplating growth in existing markets and regions; it is considering exploring new product lines coupled with increasing amounts of investment into the living room. With the amount of money Apple currently has and with a growing console market, one could very well consider it an excellent time for Apple to get into the console market as a disruptive force, and redefine it the same way it redefined the smartphone market of late.
Given the moves that Apple is making currently to get a bigger slice of the lucrative home entertainment pie, the tech giant is more than capable of entering the game console market and essentially upsetting it due to two major factors: its massive cash hoard and the fact that it is indisputably one of the world’s most powerful brands when it comes to consumer electronics. Many consumers expected a massive Apple TV hardware overhaul as not only are Apple’s offerings in the market somewhat outdated, but they no longer exhibit the same levels of ambitions that the company has in the sector. A $69 Apple TV might essentially pave the way for more consumers to essentially be bound to Apple services for a start. Apple’s relative silence on this front at the WWDC 2015 raised questions about its motives regarding its ambitions in the living room.
One needs to understand that Apple might not even actually release a new console in terms of hardware at all. While that might be confusing for many consumers when it comes to considering the current market with the bulk of consoles such as Microsoft Corporation’s (NASDAQ:MSFT) Xbox One and Sony Corporation’s (ADR) (NYSE:SNE) PlayStation 4 essentially being hardware that physically run the games provided. However, the market is fast evolving. Sony, in many ways, has read the situation specifically when it comes to consoles. Its purchase of Gaiki and OnLive reflects the very future of console games as underlying infrastructure continues to improve across the board. Microsoft is not far behind either as the company has boasted of “cloud-based” performance enhancements down the line for the Xbox One.
Apple could essentially do this both ways: it could go the conventional route and push for a console that essentially had beefy hardware and potential to take on the competition or simply take a more futuristic approach. The company enjoys a great relationship with both its consumers as well as its publishers on various fronts including the iTunes Store, something that could work in its favor. Pushing on the hardware front as a volume partner is easy for Apple, as it often gets exclusive agreements with ease and could very well have much higher end hardware on the same market at a fraction of the cost. Such a move would also see significant amounts of support from Intel Corporation (NASDAQ:INTC) and Nvidia Corporation (NASDAQ:NVDA), which are already reeling in the after-effects of losing the lucrative console market to Advanced Micro Devices Inc.’s (NASDAQ:AMD) APUs (a hybrid CPU + GPU processor) in addition to a PC market that has been stagnating for the past few years in terms of hardware sales.
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