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Thursday 9 June 2016

Apple WWDC Preview: iOS 10, smarter Siri expected

Apple Inc. is expected to launch its latest mobile operating system, reveal updates to three other operating systems, and possibly issue new Watch and Mac hardware when it kicks off its annual developer’s conference next week. Chief Executive Tim Cook will launch the weeklong Worldwide Developers Conference, or WWDC, in a keynote speech in San Francisco at 10 a.m. Pacific time Monday. The event is expected to focus on AppleAAPL,+0.67% software, such as iOS 10, Mac OS, Watch OS and tvOS. Minor hardware updates may also be revealed, though Apple tends to save the biggest hardware announcements,such as the coming iPhone 7, for its blockbuster event in September. Many of the software upgrades are expected to include improvements to Siri. “Siri is likely to be a primary focus of the event,” said Bank of America Merrill Lynch analyst Wamsi Mohan, who reiterated a buy rating and $120 12-month price target on the stock in a note to clients this week. Mohan believes developers will get a Siri SDK so that Siri can be integrated with third-party apps. This upgrade might help Apple join the growing trend of messenger bots, which Facebook Inc.FB,-0.26%  and Alphabet Inc.GOOGL,-0.39% charged into earlier this year. Integrating Siri with third-party apps like Uber or OpenTable might allow iOS users to do things like call a cab or make dinner reservations without having to actually open the app. Siri functionality will likely advance on the iPhone as well, possibly with the capability to answer phone calls, play recorded messages and transcribe voice mails, Mohan said. Apple may also unveil updates to existing apps, such as Apple Music and HomeKit. Last year, the company used WWDC as a launchpad for Apple Music, bringing Drake on stage to make the announcement, and this year’s keynote will take place at a legendary San Francisco music venue. Apple also revealed OS X 10.11—nicknamed El Capitan—iOS 9 and WatchOS 2 at last year’s WWDC keynote, while introducing its News app and giving more functionality to HealthKit. If there are hardware updates announced, Mohan said they would likely include a new MacBook Pro or MacBook Air, and potentially a new iteration of Apple Watch, though he doesn’t expect shipments for Watch 2 to occur until at least September. In March, at the company’s last hardware event, Apple unveiled a smaller-screen iPhone—the iPhone SE—a 9.7-inch iPad Pro and iOS 9.3.“We expect multiple software updates as usual, and though we don’t expect hardware updates, it’s always possible,” Baird Equity Research analyst William Power wrote. Apple stock typically has done well leading into the event, but tends to retrench “a couple of percentage points” on the day of the event, according to Mohan, citing historical trading data. However, it has ended as much as 3% to 5% higher on the month of WWDC, he said. With this year’s event, Apple faces an uphill battle in terms of impressing an increasingly skeptical investor base. Shares of Apple have declined 2% in the last three months and 23% in the last 12 months. The Dow Jones Industrial Average, meanwhile, is up 6% in the last three months and 1.3% on the year. UBS analyst Steven Milunovich reiterated a buy rating on the stock this week, saying a recent discounted cash flow analysis it conducted suggested “limited downside.” But he said a worst-case scenario would be that Apple faces a “Blackberry-like fall from grace,” with the iPhone reaching saturation in many developed markets and new products not yet helping to offset that slowdown. The stock is expected to remain range-bound in the near term, he said.

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