Reuters Insider - Trading at Noon: Apple finally expected to enter video business

Black Box

25/03/2019 19:15

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Source: Reuters Insider

Description: After years of talk about Apple launching a video service, the
tech giant is expected to do so at an event in California today. We look at
what this could mean for the company.
Short Link: https://reut.rs/2WkIS9J

Video Transcript:

Welcome to Trading at Noon, I am Leah Duncan. Apple holds an event at its
California headquarters today. The company is finally expected to announce
details of a long-awaited video service. Shares are down about 0.5% this hour.
Reuters Breakingviews Columnist Jennifer Saba in studio here to talk us
through this. Great to have you on the show, Jen.

Yeah, thank you.

What are you expecting to hear from Apple?

Well, I mean, Apple has been at this for almost a decade, kind of tinkering at
the margins with their TV service and products, so we don't know but it's
going to be some sort of bundling cable-type service where they're going to be
offering traditional stuff and then also their own original stuff. So they've
signed Reese Witherspoon, Steven Spielberg, so it's probably going to be about
that. 

How significant is this for Apple?

Well, it's hard to place a large amount of significance on this because they
have been at this for 10 years and they have not managed really to kind of get
into this area. What is interesting about it is their service revenue which is
their fastest growing line of revenue. As iPhone sales are declining, it is
right now about 15% of their overall revenue which is about $260 billion,
somewhere in that area. So they want to start making more money on services
and getting people to subscribe through their apps and do things like their TV
and news services.

Based on people that you talked to, Jen, how much more upside do you think
there is for the services revenue?

Well, I mean, they could probably, I mean, 15% of the total is there's a lot
more room to grow but they have to keep doing it. And it's questionable if
they can, you know, the momentum, if they can continue that momentum. It's
still a small part of it. So that kind of explains it. But, you know, that's
why they're unveiling things like a news and TV service type of thing.

You talked about the fact that Apple has been at this for quite some time,
about a decade.

Yeah.

This is arguably CEO Tim Cook's first gig, new product launch. What about the
impact for him here?

Well, I mean, I think it's too early to say, like this is his defining moment
or what this is. Again, because they've been tinkering at the margins on this
for a very long time. For Tim Cook, it's like, listen, we've got to show our
investors that we're thinking of other ways to make revenue than just selling
products like iPhones and watches and whatnot. And this is probably kind of a
step in the right direction that he can show people that this is what they're
doing.

And what about the significance for competitors like Netflix?

Well, if I'm Netlix, Apple is still way behind. I mean, they have shown that
they haven't acquired anything, they didn't go off and buy Disney, they
haven't bought Time Warner, again, they're making some hires here and there.
They have a lot of money, but still, they have to create the content which is
a lot.

And actually Netflix shares are higher by what happened, 1% today. Alright.
We're certainly looking out for all those announcements coming out of Apple as
that event kicks off over in California. Jen Saba, thanks so much.

Sure.

Alright. Let's check out the markets. Fears about global growth sent stocks
lower to start the trading session, though they have rebounded. The Dow, the
NASDAQ and the S&P are all higher with the Dow making the biggest move, adding
0.3%. Home Depot, Caterpillar and Boeing are climbing the most. And moving on
to our stocks to watch today, we begin with Viacom. The owner of MTV, Comedy
Central and Nickelodeon renewed its carriage agreement with DirecTV to avoid a
blackout of its channels. Sources told Reuters Viacom needed to resolve the
contract before considering any other strategic moves including a potential
tie-up with CBS. The stock is rising more than 5%. Also, Avaya the
telecommunications equipment and software vendor is considering a leveraged
buyout offer from a private equity firm that values it at more than $5 billion
including debt. The acquisition offer comes 15 months after Avaya emerged from
bankruptcy protection. Shares are soaring 36% today. And that does it for
Trading at Noon. I'm Leah Duncan and this is Reuters