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What Really Mattered at Apple’s Big Event

5 | By Michael A. Robinson

After 30-plus years in Silicon Valley, I’ve developed a thick skin.

I need it to keep myself immune from the daily barrage of useless hype that comes out of the Valley’s publicity mills every day.

That’s why I don’t fill your inbox with breathless reports every time Elon Musk burps.

That said, I still get giddy every time the fall Apple Inc. (Nasdaq: AAPL) product announcements come around. After all, Apple is the leader in consumer electronics and operating systems – the biggest and most important tech company in the world

And this year certainly didn’t disappoint.

However, while everyone is distracted by the iDevice King‘s impressive new lineup of hardware – or sharing jokes about the Apple Pencil around the watercooler – it’s what the company has brewing behind the scenes that investors like you should be paying attention to.

It’s going to change the way consumers use Apple products forever.

Let’s take a look…

The Latest and Greatest

Apple CEO Tim Cook wasn’t exaggerating when he took the stage Wednesday and told a standing-room-only crowd that “monstrous changes” were coming for Apple.

During the 2.5-hour event, Cook and his team revealed major upgrades and innovations across nearly every product line. For the most part, the pre-event rumors about upgraded phones, tablets and set-top box (Apple TV) were spot on. But Cook did manage to slip a few surprises in there.

After months of speculation, the company finally unveiled its latest iPad – the iPad Pro. For nearly two years, Apple earnings have had one consistent negative: the iPad. Year-over-year sales of the tablet have declined for six straight quarters.

But with the iPad Pro, I think that will change.

The Pro’s 12.9-inch display (a good deal heftier than its 9.7-inch predecessor, the iPad Air 2) is packed with 5.6 million-plus pixels. That’s more than some MacBooks.

Resolution and image quality was key across all of the products announced at the event, but what Apple was able to jam into this 1.57-pound device is truly impressive. The company bragged that the Pro’s graphics performance is 360 times better than 2010’s original iPad.

And that’s not the only impressive improvement. The new A9X chips are 1.8 times faster than previous iPads’ chips, making the Pro faster than 80% of tablets shipped in the last year.

Apple says the A9X is more powerful than chips found in most laptops. That’s important because, like the name says, Apple is aiming the iPad Pro squarely at the $2 trillion enterprise tech market, where the needs for power and memory are greater than in the consumer tech sector.

The iPad Pro announcement dovetails with Apple’s recent partnerships with two tech veterans with a lot of experience selling to enterprise customers: International Business Machines Corp. (NYSE: IBM) and Cisco Systems Inc. (Nasdaq: CSCO).

And then there was the new smartphone.

After the wild success of the iPhone 6, 47.5 million of which were sold in the fiscal third quarter alone, there was a lot of speculation over whether the company could dazzle investors with something new.

When Cook took the stage to introduce the iPhone6S and the iPhone6 Plus, he promised that it would be “The biggest change in the iPhone, since the iPhone.”

The new phones include A9 chips that run 70% faster, a graphics module that is 90% faster and an upgraded camera. But the most exciting addition was “3D Touch.”

With 3D touch, iPhone screens react to the amount of pressure the user applies. The 3D Touch feature opens up a range of new ways to interact with the iPhone and the apps running on it – a soft graze performs one function, while applying a harder push does something different.

Will this year’s upgrades be enough to keep the iPhone’s success going? With pre-orders set to start tomorrow and shipments two weeks later, the verdict is still out.

But like I said before, these hardware upgrades – while important, were not the most important announcements at Wednesday’s event.

Rip Up Your Phone Plan

Thanks to its new iPhone Upgrade Program, Apple just changed the landscape of phone purchasing.

Instead of paying hundreds of dollars up front for a new phone, for $32 a month, iPhone users can now purchase an unlocked phone that is eligible for upgrades annually – on the same schedule as Apple’s fall event.

Thus, Apple users will always have access to its latest and greatest devices.

Another important feature of the iPhone Upgrade Program is that AppleCare+ comes with it gratis. This valuable customer service program usually costs iPhone users $129 over two years.

AppleCare+ provides extra technical support, two years of hardware protection instead of the standard one, and $99 replacements for up to two damaged devices.

This is big for the entire mobile industry.

By offering a leasing option, Apple is going to the market directly, taking power away from the traditional carriers like Verizon, T-Mobile and AT&T and giving it back to the customer.

You’ve heard of “cord cutters” dumping their cable packages and landlines. Now, consumers can “cut” the two-year contracts that usually come with their phone plans.

Apple’s new plan gives them an exit strategy.

How to Play Apple Now

Apple is a high-profile company with a ubiquitous product line. It has a cult following, and it commands an outsized portion of sentiment.

And the share price is vulnerable to that.

Despite the impressive new lineup, traders seemed unimpressed by Wednesday’s product unveiling – and the stock closed out the day down 2% at $110.15.

If history is any guide, this could actually be a blessing in disguise for Apple shares.

The last time Apple’s stock fell in the month ahead of an iPhone event was before the first-ever iPhone was unveiled in 2007.

And in the days following its flagship announcement, the stock saw an impressive rally to new all-time highs.

True, there are a number of differences between now and 2007.

And the recent choppy market has certainly taken its toll on the stock – having dropped 5% over the past month.

But what investors seem to be gleaning over is the fact that Apple continues to outperform the Standard & Poor’s 500 Index, which dropped 7.4% in the period.

And also consider that Apple trades at less than 12 times forward earnings. That’s an incredible 40% less than the same multiple for the Nasdaq 100.

In light of all this, it’s clear that Apple’s downturn and current woes have more to do with media hype and investor anxiety than any kind of serious trouble with fundamentals. (That’s why always don my thick skin and why we follow Rule No. 2“Separate the signals from the noise.”

And there’s our opportunity.

So, here’s what you could do.

Hold onto those shares you bought back on Oct. 30, 2013, and pick up more while they’re on sale.

Long-term investors should also think about putting in a lowball limit order for even more Apple shares should prices go lower from here.

Of course, I’d still think about a “free trade” when we double. But we’re not there yet – and we have plenty to room to run.

As I often remind investors, no stock goes straight up. They all take pauses along the way.

Savvy investors like you keep a sharp eye out for these openings.

[Editor’s Note: How do you invest in Apple? Do you follow its product announcements and quarterly reports and trade off of those? Or are you in for the long haul? Let us know in the comment section below. And if you have any questions, please ask them there.]

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5 Responses to What Really Mattered at Apple’s Big Event

  1. Ted Blatty says:

    Your comments on the latest Apple iPhone show that u missed the basic points: there is no novelty in the new phone. Are u on their payroll?

  2. JEB says:

    Totally share your assessment of Apple. Too bad the Wall Street crowd and TV talking heads keep not getting it! But then again, I’ve never listened to them anyway. As you wrote, just so much noise.

  3. Dave Garfinkle says:

    I know that NXPI is the company that currently makes chips for Apple’s I-Phone. But you mentioned that Apple’s new hardware would be upgraded with chips that are about 70% faster – A9 chips.

    Is NXPI making these new A9 chips, or is some other company providing them? If so, what is the name of the company(s) that make these A9 chips?

  4. Dave Garfinkle says:

    I know that NXPI is the company that currently makes chips for Apple’s I-Phone. But you mentioned that Apple’s new hardware would be upgraded with chips that are about 70% faster – A9 chips.

    Is NXPI making these new A9 chips, or is some other company providing them? If so, what is the name of the company(s) that make these A9 chips?

  5. Roy says:

    I liked the phones, but had just one dose of Apple arrogance and attitude too many. After being blacklisted from support forums for asking unpopular questions, I and my partner traded our iPhones for Samsung Galaxy 5. They have a fair number of annoyances too, but at least we don’t have to wait in line for an hour to ask questions.

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