One of the greatest successes for Apple (NASDAQ: AAPL) In recent years, its wireless AirPods were launched at the end of 2016. The AirPods have opened what appears to be an additional revenue stream of billions of dollars. And given AirPod's transparency in the company's product portfolio, AirPods can also be said to make Apple's product ecosystem tougher.
Even though Apple has not updated its AirPods product line since the initial launch, sales remain solid, its CEO, Tim Cook, attributing the "nearly 50% growth" in business revenue of the apparel product company "at significant sales of Apple Watch and AirPods."
A new report released by the Economic Daily News, reported by MacRumors, indicates that Apple is preparing to launch upgraded AirPods that offer new surface coating, wireless charging and a color option black".
Here's why Apple investors should do the same.
Updates and new customers
The current AirPods seem to sell well, but since Apple sells the same models since the initial launch, there is nothing for homeowners wishing to upgrade to the next version. If they opt for an updated version of the AirPod, this could result in an acceleration of revenue growth. This is nothing but benefits for Apple.
The updated AirPods could also attract customers who may have been reluctant to buy the original models. The changes in store do not seem too dramatic, although Apple seems to have a long-term portfolio of AirPod innovations likely to fit that description.
Potential pricing strategies
It is far from guaranteed that Apple will stop selling the original AirPods when the second generation version will be available. In fact, Apple has long discounted the products of the previous generation when new products arrived, with the goal of expanding the accessibility of a particular product category.
I can see Apple managing the prices of the new AirPods and the current ones, if both were on the market at the same time. The first would be simply to offer the new model at a higher price, while maintaining the price of the AirPod of the current generation. The second is to launch the new AirPods at the same price as the current model and then update the current model.
There are merits in each direction. The first would allow Apple to increase its revenues and profits by increasing its average selling price. The latter would put downward pressure on average selling prices and potentially on the gross margin percentage but, in return, Apple could accelerate the growth of unit shipments.
We can be sure that Apple will conduct major market research and financial modeling to determine which approach is the best.
Take away food
Apple is a product company and it's a good thing that a product company is presenting better versions of what it was selling before. Today, Apple 's clothing business does not represent a huge percentage of its overall business figure. During its last fiscal year, only 6.6% of the revenue came from the "other products" sector, which includes (among other things) Apple's apparel products. But this is a fast-growing segment that is expected to grow in importance over time.
Therefore, it is essential that Apple continues to innovate in the clothing equipment market, which means that we must continue to make great efforts to advance successful products, such as its AirPods.
Ashraf Eassa does not hold any of the shares mentioned. The Motley Fool owns shares and recommends Apple. The Motley Fool offers the following options: Long Calls from $ 150 to January 2020 for Apple and short calls from $ 155 to January 2020 on Apple. Motley Fool has a disclosure policy.