Post 3Q16 Outlook for Mobile Device Stocks

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Part 3
Post 3Q16 Outlook for Mobile Device Stocks PART 3 OF 3

Apple Makes a Move to Get the Most out of Apple News App

Shrinking iPhone sales probably won’t destroy Apple

Does Apple (AAPL) have a life outside the iPhone? This question has become important in recent quarters as Apple struggles with shrinking iPhone sales amid stiff competition and market saturation.

For the September quarter, or 4Q16, Apple reported a fall of 9.0% in revenue to $46.9 billion. The quarter was dragged down by weak iPhone sales. The company sold 2.5 million fewer units of the device compared to 4Q15. With iPhone sales accounting for more than 63.0% of Apple’s quarterly top line, pressure in the smartphone market worries Apple investors.

But apparently, Apple hasn’t run out of options to grow its revenue and break its overreliance on iPhone sales. In a move that could give a footing to the company’s mobile news app (application), Apple recently inked a deal with Comcast’s (CMCSA) NBCUniversal to sell its ads on Apple News.

Apple Makes a Move to Get the Most out of Apple News App

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Allowing experts to manage Apple News

The graph above shows Apple’s quarterly revenue trend. Tapping NBCUniversal seems to indicate that Apple is handing over the business of selling ads on its news app to an expert. NBCUniversal’s network and expertise in selling ads could attract more advertisers to Apple News, thus generating more revenue for Apple.

Ad publishers will keep 70.0% of the revenue generated from ads alongside their content on the mobile news app. Apple and NBCUniversal will split the remaining 30.0%.

Although Apple News is still a small business, it seems to have a bright future. Apple launched its mobile news app in 2015, and so far, it has attracted more than 70 million monthly active users and more than 4,000 publishers.

New competition

In the mobile news business, Apple is competing for market share with Facebook (FB), Alphabet’s (GOOGL) Google, and traditional news organizations such as the New York Times (NYT).

Other than Apple News, Apple’s other efforts to diversify revenue streams include Apple Watch and Apple Music.


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