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Apple at Worldwide Developers Confc

As anticipated, Apple Inc. (AAPL), in its ongoing annual Worldwide Developers Conference (:WWDC) announced a bunch of new applications for its upcoming iOS 6 operating system. The thing that stood out was its homegrown mapping software.

The company also previewed its new Macintosh operating system, Mountain Lion, and announced a number of updates for the MacBook product line.

Over the years, Apple has used the WWDC platform to launch new services, hardware products and software such as iCloud, iPhone 4, 3GS, 3 and operating system iOS 4. Last year, Apple previewed an upgraded iOS 5, and released a beta version to iOS Developer Program members in the same conference. However, in 2011 Apple broke away from its tradition of unveiling a new iPhone at the WWDC.

This year, Apple again refrained from providing any details of the upcoming iPhone, amid growing speculation of a late 2012 release. The company also did not provide any update on its highly anticipated Apple Television, much to the dismay of investors and customers.

An iOS Focused WWDC

Lately, Apple has been focusing on enhancing the features of its mobile operating system iOS, in order to boost its weakening market position versus Google’s (GOOG) Android operating system. According to Gartner, Android was the #1 platform in the first quarter, with 47.0% market share, whereas iOS had 23.0% market share and was placed at #2.

Apple announced approximately 200 new features for the upcoming iOS 6 (scheduled to release in fall this year), including a new mapping service. The internally developed mapping and navigation software will come pre-loaded on both iPhone and iPad replacing Google Maps.

The new mapping software is based on 3D technology. The application has a Flyover function which provides 3D images of cities, along with a turn-by-turn navigation system and real-time updating of traffic data. Moreover, the application is capable of offering alternative routes depending on traffic conditions.

The new service reflects the growing animosity between Apple and Google. Although Google remains the most-favored search engine for iPhone and iPad, Apple’s move reflects the company’s policy of reducing dependence on Google. The new mapping service is definitely going to hurt Google as the company used to generate approximately half of its mobile map traffic from Apple’s mobile devices.

Other iOS features include an updated Siri (Apple’s voice command application launched with iPhone 4S) which will now be able to launch applications. The database has also been expanded, and now includes a number of languages, including Cantonese and Mandarin, a clear indication of Apple’s growing focus on China. Siri is also available with the new mapping service.

Along with these, Apple launched a new application called “PassBook” which helps users to store boarding passes, ticket information and other important documents. The company also announced a tighter integration with Facebook (FB), which now allows Siri users to post photos carrying voice commands. The company also launched lots of new software that helps users block messages and text notifications by choice, set reminders and other features.

Macintosh Updated…

Apple announced a new lighter MacBook Pro, which is only 0.71 inches thick and weighs 4.46 lbs. The new MacBook features retina display, well popularized by iPhone and the “new iPad.” MacBook Pro comes with a 15.4 inch screen with a pixel density of 2880 X 1800, 2.3 Ghz processor, 8 GB RAM and is priced at $2,199.

Apple announced an updated faster MacBook Air which features a 2.0 Ghz i7, a third generation Ivy Bridge processor and up to 8GB of memory. Apple also updated the existing MacBook Pro lines.

Apple previewed the Macintosh operating system Mountain Lion, which supports iCloud. The new operating system allows voice commands and the dictation facility is also available. Mountain Lion costs $19.99 and will be available from next month through the Mac App Store.

Our Take

We believe that the lack of new surprises (much expected from Apple events) and absence of new iPhone and iTV details has left very little to cheer about at the WWDC. Except the mapping software, we believe there is not much in the headlines to move the stock upward in the near term.

Moreover, this reflects iPhone’s key position in Apple’s portfolio in our view. We don’t expect much detail from Apple in the remaining three days of the conference (concluding on June 15th). However, we believe that consumers can defer their purchases based on rumors surrounding the fall release of iPhone, which may hurt Apple’s top-line growth in the upcoming third and fourth quarters.

That said, we believe that Apple’s innovative product portfolio, loyal customer base, huge cash balance and international expansion opportunities remain positives for the stock. At the same time, we expect Apple to continue to face significant competition from handset makers such as Samsung and HTC on the hardware side and Google’s Android on the software side.

We have an Outperform rating on Apple over the long term. Currently, Apple has a Zacks #2 Rank, which implies a Buy rating over the next 1-3 months.

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