Apple Inc. (AAPL) unveiled pricing details of its iCloud services on the company website. The offering is expected to strengthen Apple’s position in the online services segment.
This iCloud service is an online offering to store digital files like photos, music and videos. Music for Apple has been one of the strongest domains, and Apple would like to offer iCloud services to its customers, enabling them to create, store and listen to their music collection online by streaming onto any web accessible device.
iCloud is a complete suite of services that can be accessed from the iPhone, iPad, iPod touch running iOS 5 and Macintosh running Mac OS X Lion, with a valid Apple ID enabling Apple product users to store and retrieve applications in the cloud for free.
iCloud service comes with 5 gigabytes (GB) of free storage space for its users. In addition to free storage, users have the option to purchase additional 10 GB space for $20.00 per year, 20 GB for $40.00 per year and 50 GB for $100.00 per year. Apple also stated in its web site that the applications, books and music will not count against the 5 GB of free storage. Mail, documents, photos and account settings will count towards the iCloud free storage.
We believe that the new product releases will drive further growth for Apple. The new iCloud service will likely generate incremental revenue for the company. With this new offering, the company is focused on strengthening its footprint in the emerging cloud computing market. Apple has three data centers to support iCloud.
We also believe that iCloud will provide Apple a competitive edge over the music services launched by Google Inc. (GOOG) and Amazon.com Inc. (AMZN), as Apple has license agreements with three top record companies.
Given the loyal customer base, international expansion, competitive pricing strategy and solid cash position, we remain optimistic on Apple’s long-term growth.
However, increasing competition in most of its major product segments, possible delays in product launches, higher operating expenses and increasing legal complexities compel us to maintain our Neutral rating over the long term (6-12 months).
Currently, Apple has a Zacks #1 Rank, which implies a Strong Buy rating in the near term.
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