Skeumorphism

Apple Inc.'s WWDC: What Wall Street expects on Monday

June 8, 2013: 8:19 AM ET

A new look, new services and maybe new MacBooks at Apple's developers conference.

Banners on Moscone. Photo: AppleInsider

Banners on Moscone. Photo: AppleInsider

FORTUNE -- The annual gathering of Apple (AAPL) developers -- which sold out in less than 2 minutes when tickets went on sale in April -- kicks off Monday with CEO Tim Cook's keynote at 10:00 a.m. PST (1:00 p.m. EST) in San Francisco's Moscone Center.

There is, as usual, much fevered speculation among the Apple bloggers about what the company has up its sleeve. This year, for some reason, the analysts who follow Apple have joined the fun.

Excerpts from the clients notes we've seen:

Barclays' Ben Reitzes: WWDC Needs to Highlight a Sticky Platform, Warranting a Premium. We believe the significance of this event lies in new software and services that should be previewed – and whether these initiatives start to change the "narrative" for Apple. We believe that Apple will preview some key enhancements, which could include a new look for iOS, the facilitation of mobile payments through Passbook, new subscription services through iTunes and further integration efforts with developers to fuel adoption of Siri and iCloud. As a result, this event is key in terms of showing that the ecosystem remains strong over the long term and warrants premium priced Apple products, while attracting more users through new use cases.

At the event, we expect to hear about iOS 7 and an update to OS X (10.9). We also consider the possibility that Apple will release more API's for Siri and iCloud to developers, which could fuel the development of applications that take further advantage of these features. We look for Apple's Eddy Cue to make an announcement regarding a Pandora like service that could help defend iTunes against the emergence of new music models – an iRadio. In terms of hardware, Apple may refresh the MacBook Air and Mac Pro as well - with new processors. We also will be watching for any hints about a further expansion into wearable computing – especially an iWatch. Rating: Neutral. Price target: $525.

RBC's Amit Daryanani: Thinking About WWDC 2013 - iOS 7, Mac refresh and iRadio.
iOS 7 Launch:
Look for AAPL to overhaul iOS7 with an updated design overseen by Jony Ive. Notably, as it has been widely reported, the new iOS will have flatter icons and will move away from skeumorphism (digital interfaces that replicate the physical look). In addition, we expect enhancements to maps, iCloud and Siri, potentially enabling developers to leverage these offerings. With regards to iCloud, we would look for better management and transparency for users to see what they have stored in the cloud (specially via a mobile device). Overall, while we expect an aesthetic and visual overhaul of the UI (user interface), we don't expect this to be a material EPS driver.

iRadio – Streaming Music Service: This could be one of the more exciting launches at WWDC, as it would launch AAPL into the streaming music industry and enable the company to leverage its "iAD" product to offer free (and premium) streaming radio service. While recent industry articles suggest AAPL is facing delays due to contract negotiations with content providers, we do think this launch could be one of the more interesting launches at WWDC. A successful streaming service would bring back the stickiness that AAPL's ecosystem has lost given the launch of multiple third-party streaming music services.

Hardware Products: Historically, WWDC has focused on software; however, given that the MacBook line has not yet been refreshed we would not be surprised to see a new MacBook Air (MBA) and MacBook Pro refresh. In our view, both the MBA and MacBook Pro are key product lines for the company from a consumer standpoint and both are due for a product cycle refresh. Outperform. $475.

Cowan's Mathew Hoffman: New OS Key to New Product Cycle. There is little doubt Apple will announce iOS 7.0 -- the latest update to its mobile platform -- at next week's WWDC event. Software remains Apple's primary point of differentiation, so the launch should help to rebuild growth as the OS spurs upgrades of older hardware and captures the attention of new users. We expect iOS 7.0 will run well on iPhone 4S hardware, less well on devices with older processors. We do not expect an iPhone 5S or a much- anticipated replacement product for the iPhone 4/4S price points. Services (iCloud, iRadio, PassBook with NFC, etc.) remain a key source of potential revenue growth, but we await the WWDC details before getting more enthusiastic. Outperform. $550.

Morgan Stanley's Katy Huberty: Could Services Be the Next Upside Driver? Apple's 500MM account base grows faster, interacts with and spends more than other platforms, and yet is valued at a discount. New services and products are key to unlocking value, in our view, with WWDC the next opportunity to showcase innovation. Potential Avenues of Innovation: 1. Mobile payments. Hypothetically, Apple could leverage existing credit card accounts registered with iTunes and the App Store, but allow users to purchase products and services outside of Apple's own properties with ease... 2. Music streaming. Apple could also launch a music streaming application to complement its existing iTunes ecosystem... We estimate Apple could generate $1B of annual revenue through a streaming music product. 4. Ad exchange. Apple could leverage its iAd product to differentiate its platform for developers and users by creating an ad exchange. Developers could potentially charge higher rates than ad impressions on other devices. Overweight. $540.

Deutsche Bank's Chris Whitmore: WWDC expectations and margin risks. We expect the focus to be placed on new Software releases (Mac OS and iOS 7) and highlight the developer community's ability to monetize their Apps on Apple's platform. Specific items we are looking for include: 1) an overhaul of the iOS user interface (impact of Jony Ive's flat modernized look and feel), 2) iCloud updates 3) Siri refinements and 4) a Maps upgrade. AAPL will also likely provide a peek at new OSX features (borrowing from iOS touch interface and Apps). While we don't anticipate any iOS hardware announcements at WWDC (perhaps new MacBooks), we believe initial component orders have started for long lead time parts in preparation for this fall's iPhone launch (i.e. September; mfg ramp in Aug). After WWDC, the big question marks facing Apple include: 1) margin impact of the substantial product transitions on the Sept quarter, 2) the impact of a lower end iPhone on Apple's overall revenue (ASP) and profitability and 3) whether a potential deal with China Mobile is consummated. Buy. $480.

Jefferies' Peter Misek: WWDC expectations. We believe the main focus will be iOS 7, which is expected to be drastically transformed with a "flatter" appearance. We also expect Apple to introduce the long-awaited "iRadio" streaming music service. We had been expecting an announcement since Fall of 2012 but believe failure to reach deals with record labels has been causing the delays. We expect some refreshes to the Mac line. A surprise at the event could be "iWallet." Hold. $420.

Wells Fargo's Maynard Um. Apple Worldwide Developers' Conference on June 10-14. Apple plans to host its annual developers' conference focusing on the company's software capabilities. We expect Apple to announce and highlight key features of the next version of its mobile operating system (iOS7) and the Mac operating system (OS X 10.9). On the iOS side, we believe the key change to watch is the potentially new user interface. Other key iOS announcements, in our view, could include potential support for finger-print security. While the conference typically focuses on software, we believe Apple may announce its new MacBook devices. Market Weight. $485 to $525.

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