AAPL Valuation Metrics, Apple's Improving Valuation, Apple Close to $3 Trillion Market Cap (Again)
Hello everyone. The update kicks off with an examination of AAPL valuation metrics (forward P/E, EV/FCF, and free cash flow yield). We then go over Neil’s thoughts on why Apple’s valuation metrics have improved so dramatically in recent months. The discussion goes over Apple getting close to a $3 trillion market cap for the second time.
Let's jump into today's update.
AAPL Valuation Metrics
The AAPL roller coaster continues.
When we last talked about AAPL valuation at the beginning of the year, shares were on a down trend (-28% from all-time highs put in January 2022). Since that update was published, AAPL shares are up a whopping 45%. These are large, although not entirely unusual, moves for such a mega cap stock.
For today’s valuation exercise, it's prudent to run with a forward EPS estimate (earnings for the next 12 months) of approximately $6.00. With Apple shares trading at $189, the company’s forward price-to-earnings ratio (current stock price / forward EPS) is 32x. This is up significantly from the beginning of 2023 when shares were trading at a 20x forward multiple. It’s not the easiest exercise to compare the current forward multiple to historical averages given that we are relying on forward estimates and not reported figures. With that said, a 32x forward multiple would be close to all-time highs for Apple in the modern era. Shares had gotten close to the level in the summer of 2020 as shares made a major move higher prior to significant EPS growth which subsequently brought forward multiples down.
To put the 32x forward multiple in context, we compare Apple to various sectors and the overall market using the S&P 500 as a proxy.
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Apple Makes “Silo” Episode Free on Twitter, Google Cancels AR Glasses Project, YouTube Testing Playables Games Service
Happy Wednesday. We kick things off with Neil’s thoughts on Apple making the first episode of “Silo” for free on Twitter. Our attention then turns to Google cancelling its AR glasses project to focus on SW partnerships. The strategy doesn’t make any sense to Neil. We conclude with Google looking to give gaming another shot.
Let’s jump into today’s update.
Apple Makes “Silo” Episode Free on Twitter
Yesterday, Apple surprised many people by making the first episode of “Silo” available for free on Twitter. “Silo” is a science fiction drama that Apple picked up in May 2021 for Apple TV+. The first season began to stream last month.
From Apple's website: “‘Silo’ is the story of the last ten thousand people on earth, their mile-deep home protecting them from the toxic and deadly world outside. However, no one knows when or why the silo was built and any who try to find out face fatal consequences.”
In the past, Apple has used Twitter for some unconventional Apple TV marketing. The premier episode of “The Afterparty” was made available in early 2022 via a live watch party given limits on video upload lengths. The Apple TV team may have been wanting to do something like release a full episode directly on Twitter for some time. Twitter only recently allowed the ability to upload long video uploads. Apple may have also seen an opportunity to make big waves by being one of the first to try something like this.
Making the full first episode of "Silo" available for free on Twitter is timed not only to coincide with the season finale hitting on Friday, but also the series recently being renewed for a second season. Getting more people hooked onto the series now will generate continued interest in Apple TV+ when the new season goes live down the road.
This is a clever move by Apple.
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How Apple Leverages Product Branding, Making Vision Pro Cool
Hello everyone. Yesterday’s discussion about headset adoption piqued Neil’s interest in Apple’s branding opportunity with Vision Pro and the idea of how to sell "coolness" for the face. Before we get to that discussion, there was one branding-related item worth touching upon in content streaming land.
Last week, we talked about Warner Bros. Discovery looking to license HBO shows to Netflix. In the forum, one member shared a different view than mine. Warner Bros. Discovery can license its less premium content to Netflix, which lacks a premium brand. “Netflix’s cash is used to strengthen their [mass market] positioning, something Max can be OK with as Netflix has seemingly cemented its massmarket segment dominance while Max is showing no ambitions to steer away from premium programming. Max can then use the extra cashflow [from Netflix] to pour it into its premium content and further boost its premium-mass market brand.” You can check out the full comment here.
Such a view makes sense to me in a world where Warner Bros. Discovery didn't have its own paid streaming option. If the concern is found with Max containing premium and non-premium content brands, one option is for Warner Bros. Discovery to offer three different streaming services (Discovery $5 per month / Warner $10 per month / HBO $20 per month) with an attractive package discount when getting all three. While this will jeopardize near-term revenue, it helps the company's long-term direct-to-consumer relationships.
How Apple Leverages Product Branding
Apple has a long history of leveraging product branding to strengthen its ecosystem. The classic white wired EarPods hanging out of one’s ears went on to define a generation of consumer electronics. In recent years, Apple has doubled down on the product branding strategy. The following examples have anchored Apple commercials, advertisements, and marketing.
iPhone
Home button (still found with the iPhone SE)
iPhone X notch
iPhone 14 Pro / Pro Max Dynamic Island
iPhone back camera layout
Apple Watch
Rectangular display
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The Vision Pro Bet, Zuckerberg’s Miscalculation, A New Normal for Headsets
Hello everyone. Happy Monday.
One follow-up to a story from last week.
As pointed out to me by a member, the visionOS VR restriction regarding a 1.5-meter "system boundary," as measured from the initial position of the Vision Pro wearer's head, isn’t that strict considering it’s a radius (i.e. a 10ft x 10ft space). That’s larger than what most would deem acceptable for VR in today's marketplace.
Let's jump unto today's update.
The Vision Pro Bet
There were three broad tracks available to Apple with AR/VR headsets in mind:
Begin at the low end with a pair of light/thin/inexpensive glasses and then work their way up the performance/feature/price curve.
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Apple Releases visionOS SDK, Creating Spatial Experiences, Apple’s Developer Advantage
Hello everyone. We are getting our first look at the visionOS software development kit (SDK). Developers are now able to give visionOS a spin in a simulated environment via Reality Composer (macOS and iOS apps).
One reason Apple unveiled Vision Pro at WWDC was to give developers time to develop apps ahead of the headset’s release in early 2024 (my expectation: March/April 2024). Today's update will focus on the SDK and a few points regarding app development.
Apple Releases visionOS SDK
In a press release issued yesterday, here’s Apple:
“Apple today announced the availability of new software tools and technologies that enable developers to create groundbreaking app experiences for Apple Vision Pro — Apple’s first spatial computer. Featuring visionOS, the world’s first spatial operating system, Vision Pro lets users interact with digital content in their physical space using the most natural and intuitive inputs possible — their eyes, hands, and voice. Starting today, Apple’s global community of developers will be able to create an entirely new class of spatial computing apps that take full advantage of the infinite canvas in Vision Pro and seamlessly blend digital content with the physical world to enable extraordinary new experiences. With the visionOS SDK, developers can utilize the powerful and unique capabilities of Vision Pro and visionOS to design brand-new app experiences across a variety of categories including productivity, design, gaming, and more.
Next month, Apple will open developer labs in Cupertino, London, Munich, Shanghai, Singapore, and Tokyo to provide developers with hands-on experience to test their apps on Apple Vision Pro hardware and get support from Apple engineers. Development teams will also be able to apply for developer kits to help them quickly build, iterate, and test right on Apple Vision Pro.”
One takeaway from this year’s WWDC and the Vision Pro demo was that Apple has something big on its hands, and they know it. Part of that observation relates to Apple’s well-thought-out and comprehensive approach to getting Vision Pro off the ground. This includes everything from a well-orchestrated demo strategy for members of the press, an SDK for developers, and what will eventually be consumer demos at Apple stores. We now have new information about Apple opening developer labs around the world and making developer HW kits available to some teams/companies. This is not a trivial launch effort for some niche product that Apple isn’t sure about. Instead, Apple is all-on on Vision Pro as its next computing platform.
In a new document published yesterday alongside the visionOS SDK, meant to help developers approach visionOS, Apple went over many details as to how it expects the platform to be used. The full document is available here.
A few highlights:
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Spotify Earnings, Spotify Planning Supremium Tier, Warner Bros. Discovery Looking to License HBO Content to Netflix
Happy Wednesday. For today's update, we will take a spin through content streaming land.
Spotify Earnings
Back at the end of April, Spotify reported 1Q23 earnings.
Spotify management's narrative changing yet again. There is increased emphasis on paid subscriber growth and the impact it will have (eventually) on profitability. Although Spotify has never been shy talking about user growth since the company needs as many users as possible for its advertising ambition to materialize, premium subscriptions didn't receive as much attention in recent years.
As for what is driving the narrative change, Spotify’s premium sub growth numbers continue to be very strong. The company added 5M premium subs last quarter (bringing the total to 210M). Spotify earns most of its revenue (89%) from premium subscriptions.
Here is my go-to quarterly exhibit tracking Spotify subscriber trends:
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The Talk Show at WWDC, Apple CEO Succession
Happy Tuesday. The discussion kicks off with Neil’s thoughts on John Gruber's live episode of ‘The Talk Show’ at WWDC. We then revisit the topic of Apple CEO succession. Let’s jump right into today’s update.
The Talk Show at WWDC
For the past decade, Daring Fireball's John Gruber has recorded a live episode of his 'The Talk Show' podcast during WWDC in California. The show has become something of a WWDC keynote reaction event where Apple executives discuss additional detail and perspective on new features and products that were announced.
Over the weekend, I was able to watch this year’s show. A video of the 2-hour talk is available here (via YouTube). Guests included:
John Ternus (SVP Hardware Engineering)
Mike Rockwell (VP Technology Development Group)
Craig Federighi (SVP Software Engineering)
Greg Joswiak (SVP Worldwide Marketing)
Based on what was discussed at WWDC, and The Talk Show’s audience makeup, there were no major surprises found with the guest list. Joswiak and Federighi are regulars on the WWDC show. Joswiak excels at this format, hitting those Apple marketing points in a down-to-earth approach while adding the right amount of humor.
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How Vision Pro Can Impact Apple’s Other Products
Hello everyone. We are going to do something different today. One topic that has been on Neil’s mind the past 10 days or so is how Vision Pro can impact Apple’s ecosystem. After just a few minutes using Vision Pro, it became clear that this device was going to encroach on iPhone, iPad, and Mac use cases. Current Apple devices feel dated compared to Vision Pro. That doesn’t necessarily mean that Apple’s other product categories have expiration days. In today’s update, we will explore that topic.
How Vision Pro Can Impact Apple’s Other Products
Watching the WWDC keynote, one thing that jumped out at me was how Apple positioned its software platforms and product categories. There was a prevailing theme / focus found with each category:
Apple Watch / watchOS = health/fitness
iPhone / iOS = communication/identity
iPad / iPadOS = versatility
Mac / macOS = performance
AirPods = audio
tvOS = video consumption
Those focus areas aren’t a new development for WWDC 2023. Apple has spent years laying the groundwork for giving each of its product categories key roles to play that other Apple products aren’t in a great position to handle.
The Apple Watch is one of the easier examples to discuss.
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Apple Acquires AR Headset Maker Mira, Vision Pro Supply Constraints, Apple and Disney M&A Chatter Grows
Hello everyone. We will talk about three Apple-related news items that came out in the past week.
Apple Acquires AR Headset Maker Mira
“Apple has acquired Mira, a Los Angeles-based AR startup that makes headsets for other companies and the US military, according to a posts from the CEO’s private Instagram account yesterday seen by The Verge and a person familiar with the matter. Apple confirmed the acquisition.
The news comes just one day after Apple unveiled the Vision Pro, a $3,499 mixed reality headset that the company has billed as a new ‘spatial’ computing platform. It’s unclear how much Apple paid for Mira, which raised about $17 million in funding to date. Jony Ive, Apple’s former design chief, was an advisor to the startup at one point, according to two former employees who requested anonymity to speak without the company’s permission.
Apple sent The Verge its typical statement it gives when it buys a company: ‘Apple buys smaller technology companies from time to time, and we generally do not discuss our purpose or plans.’”
This has all the makings of being primarily a talent acquisition. It is certainly possible that Apple also got its hands on some patents. However, Mira’s focus on being a design-led, scrappy startup piecing together smartphone components and $15 fish bowls to come up with an AR headset with a visor-like shield speaks more to ingenuity and ideas being their most valuable asset.
Mira’s CEO and co-founder, Ben Taft, is all-in on AR while showing heavy skepticism of the metaverse/VR.
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Apple's WWDC 2023 Keynote (Granular Observations)
Happy Tuesday.
We will wrap up our analysis and discussion of the WWDC keynote. Yesterday, we went over the larger takeaways from the keynote. In today's update, we will focus on granular items that jumped out at Neil attending and watching the keynote.
Let's jump right in.
Keynote Structure
Layout. This year’s WWDC keynote structure was close to my expectations. Apple had a jam-packed presentation containing software updates across its ecosystem, new Mac hardware, and a “One more thing” for Apple Vision Pro.
Having a digital presentation helped Apple tremendously as the company was able to fit in a lot of information in its preferred two-hour time slot. A live presentation takes up time when considering speakers walking on and off stage, audience applause, and the overall time drain known as onstage demos. (It is interesting how companies like Google have gone back to live presentations for keynotes. That ship has sailed for Apple.)
Target Audience. The WWDC keynote is aimed at developers since it kicks off Apple’s multi-day developers conference. The opening video and Cook’s monologue in the beginning set the stage. This doesn’t mean that the keynote is structured just for developers' interest - that's what the Platforms State of the Union presentation is for. Instead, the WWDC keynote is aimed at informing those in the Apple ecosystem of what to expect in the next year (from a software development perspective).
Priorities. This year’s WWDC keynote was 126 minutes long, roughly 20 minutes longer than prior virtual WWDC keynotes.
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The Lack of “AI” at WWDC, Revisiting Apple’s Identity Network, iPhone StandBy, Mac HW Updates
Hello everyone. Welcome to a new week.
We will focus on the major takeaways from Apple’s WWDC keynote (not including Vision Pro which we discussed last week).
Let’s jump in.
The Lack of “AI” at WWDC
In what doesn’t come as a surprise, Apple didn’t mention “AI” once during the WWDC keynote. According to CNET, Google said “AI” 143 times during its I/O keynote. That's a little more than one AI mention per minute. In addition to "AI," Google said “Bard” 42 times, “PaLM” 35 times, and “Generative” 30 times.
The lack of AI mentions in the WWDC keynote was intentional on Apple’s part. Every slide shown at an Apple event is there for a reason. Words, images, and videos are debated, chosen, and reviewed.
There are two primary reasons for the lack of “AI” in Apple’s keynotes:
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The Challenge Selling Vision Pro, Vision Pro Competition, Vision Pro Q&A
Hello everyone. We kick things off with a big challenge Apple will face selling Apple Vision Pro. The discussion then turns to Vision Pro competition and the degree to which Neil thinks Apple’s headset will impact the AR/VR/mixed reality industries. We conclude with Neil answering 11 questions from members about his 30-minute Vision Pro demo.
Let’s jump in.
The Challenge Selling Vision Pro
One takeaway from my 30-minutes with Vision Pro was that Apple will have an easier time selling the headset if consumers can experience a demo. The presentation that Apple showed during the WWDC keynote – the company also released a 9-minute video overview - didn’t come close to conveying what it’s like using the device. Trying to explain spatial computing in 2D terms has been a problem for years.
Apple can’t demo Vision Pro on stage. This is not like an iPhone, iPad, or even Apple Watch. That is a challenge for Apple.
Since Apple needed to come up with some type of marketing for the device, the company landed on relatable scenarios and use cases that they think people can see themselves in or doing.
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The “Why” Behind Apple Vision Pro, Apple Revolutionizes Memories, Vision Pro Pricing Strategy
Hello everyone. There is a slight change of plans. Yesterday’s update led to the largest number of incoming emails from members following an update in years. Accordingly, we are going to keep running with the Vision Pro discussion. Neil spent about 30 minutes using Apple Vision Pro. The technology powering the device is the future. We will get to the rest of Apple’s WWDC announcements.
A few quick items:
A virtual member meetup took place this past Monday in the Above Avalon team in Slack. The value found with having it take place in Slack is that people can still add to the discussions that took place. If you haven't checked the meetup out, look in the #random channel. The start of the meetup is pinned / shaded in a yellow hue.
Vision Pro sound quality. Yesterday’s discussion didn’t include any mention of Neil’s audio experience using Vision Pro. The headset includes a pair of speakers, positioned in the head strap and angled towards the wearer’s ears. The sound quality was very good. Just as important, there was no issue hearing other people in the room while something was playing via the headset. It’s not known what someone seated next to an Apple Vision Pro wearer can hear though.
Q&A. Have questions about Apple Vision Pro? Send them Neil’s way and they can be addressed tomorrow. There has already been a decent number of questions posted in the member forum (they will be covered).
The “Why” Behind Apple Vision Pro
It’s a positive sign for Apple that those who were among the first to try out Vision Pro have landed on different things as their “favorite” experience. Some people say the mindfulness app was what opened their eyes (the word trippy came to mind with that app). Others say the live sports consumption implications jumped out at them. There isn’t one right or wrong answer. Depending on the wearers’ personality, likes, interests, and perspective, different things will jump out at them. The era in which one thing is a “killer app” for everyone ended years ago.
There are still important questions left unanswered: Why sell Vision Pro? What is the device’s purpose?
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My Thoughts After Using Apple Vision Pro
With this year’s WWDC review, we are going to do something different. Today’s update will focus on the big news: Apple Vision Pro. In particular, we will go over Neil’s time using Apple’s first headset. Neil spent about 30 minutes using Apple Vision Pro. The technology powering the device is the future.
Everything else that Apple announced yesterday was important as it pertains to today’s ecosystem. We will talk about those updates on Thursday using a traditional big picture takeaways framework. There will be a follow-up tomorrow to today’s headset discussion as Neil’s notes were too long to fit in one update. In particular, we will talk about the “why” behind Vision Pro.
Let’s jump right in.
My Thoughts After Using Apple Vision Pro
With Apple Vision Pro, Apple has something big on its hands, and they know it. This is not a developer kit. It’s not an enterprise-only device. Apple Vision Pro is a new-age, wearable computer for consumers. We have not seen anything like it before. After using Apple Vision Pro for just a few minutes, it became clear this where the future is found. You don’t want to stop using the device. Apple Vision Pro makes the iPhone, iPad, Mac, and even Apple Watch feel like dated technology.
The question isn’t what people will use this technology for, but rather what won’t be handled by this in the future.
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Google I/O 2023
Hello everyone. Welcome to June.
Virtual Member Meetup on Monday. Following the WWDC keynote, there will be a virtual member meetup in the member forum in Slack on Monday at 5:30 pm ET / 2:30 pm PT. Hopefully that time will also allow some members in Europe to join. This meet-up will provide an opportunity for members to have conversations in real-time about everything that was announced. In addition to participating in the discussion myself, I moderate the discussion topics etc. The discussions are then made available afterwards for other members to read through in Slack.
Above Avalon Report. With Apple widely expected to unveil its first headset on Monday, my expectations for the device are found in the Above Avalon Report "Apple's Reality (Headset) Plans" published back on April 12th. You can read the report here. An audio version of the report is also available via the Above Avalon Reports podcast (part of the podcast add-on).
Today’s update will be focused on the Google I/O 2023 keynote. In addition to covering Neil’s thoughts on the keynote, the discussion goes over the weakest/strongest points of the presentation as well as the oddest parts. Given the discussion’s length, Spotify earnings was pushed off. We will circle back to Spotify post-WWDC.
Let’s jump right in.
Google I/O 2023
Google held its developer conference in mid-May. Like Apple’s WWDC keynote, Google’s I/O keynote (available here for viewing via YouTube) is geared toward consumers, developers, and the press. The company then held more developer-focused presentations afterwards.
While Google unveiled AI-driven features in prior years, the difference found with this year’s Google I/O keynote is that it took place in the shadows of ChatGPT and Microsoft's AI push. One got the sense that Google felt insecure about the AI attention being given to others. It was hard to ignore the “we are actually the AI leader” tone emulating throughout the presentation. The thing is, very little that was shown on stage struck me as “only Google.” AI will be adopted by all of Big Tech – it already has been.
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Sonos Earnings, Sonos Unveils Sonos Pro, Peloton Earnings
Hello everyone. Two quick follow-ups to yesterday’s update:
The “ESPN in 100M households at its peak” vs. "Netflix’s 74M paying subscribers in the U.S. and Canada" is not a simple comparison. Not only is password sharing rampant with Netflix - making it likely that Netflix is found in more than 74M U.S. households – but it’s also very simple to signup/cancel a Netflix subscription. ESPN was, and still is, only available as part of a $$ bundle.
A few people reached out to me to say that they have never had a woven/fabric Apple Watch band tear or split despite years of usage. Such wear and tear for a band specifically marketed as rugged seems odd. I agree with that statement. At least based on my experience, Alpine Loop was far too delicate to be part of the Apple Watch Ultra series. That doesn't mean Apple should move away from comfortable materials for Ultra bands. Instead, they should introduce more rugged bands that begin to provide additional utility to the wearer.
In today’s update, we begin to wrap up our CY1Q23 earnings reviews with smaller companies that remain intriguing to keep an eye on from an industry/competition standpoint: Sonos and Peloton. We will cover Spotify tomorrow.
Sonos Earnings
Sonos was not able to escape the consumer gadget recession. CY1Q23 revenue was down 24% to $304M (vs. $400M last year) as fewer people bought premium speakers in the home. The closest equivalent to unit sales was down by about 30% While Sonos fell victim to a tough year-over-year compare, similar to what Apple experienced in a few product verticals, sell-through demand was also weaker.
Here is Sonos speaker sales on a TTM basis to remove the seasonality associated with the holidays:
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The Case for More Durable Apple Watch Ultra Bands, Disney Planning Standalone ESPN Offering
Hello everyone. The daily updates return with a post-Memorial Day update focused on some of Neil's thoughts about Apple Watch bands. We then turn to news on the Disney streaming front.
The Case for More Durable Apple Watch Ultra Bands
Apple is no stranger to selling higher-priced Apple Watch bands. Over the years, Apple has sold more than 620 bands, ranging from the entry-level $49 Sport Band and Solo Loop to the $99 Milanese Loop and $339+ Link Bracelet.
Throughout Apple Watch’s history, higher-priced Apple Watch brands have been associated with luxury and fashion, not additional utility. For the Apple Watch launch in 2015, Apple sold exclusive Link Bracelets for Apple Watch Edition. The Hermès partnership, now in its eighth year and centered around the company’s leather expertise, includes high-priced bands with the top one currently going for $849.
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More Signs of U.S. Consumers Turning Cautious, Apple Signs Multi-Year Deal With Broadcom, Peloton’s Rebranding and New Membership Tiers
Hello everyone. We kick things off with the fourth largest U.S. retailer sounding the alarms about the U.S. consumer. The update goes over how U.S. consumers becoming more cautious stands to impact Apple. The discussion then turns to Apple signing a new multi-year deal with Broadcom. We conclude with Peloton’s rebranding and new membership tiers. It’s extremely hard for Peloton to come in below Neil’s expectations these days. The company’s new membership tiers do just that.
Let’s jump into today’s update.
More Signs of U.S. Consumers Turning Cautious
On Apple’s most recent earnings call, management alluded to seeing some weakening in iPhone demand in the U.S. This would manifest itself through Apple’s financials via fewer unit sales as upgrade rates slow. In what would only be a partial offset to lower unit sales, iPhone ASP may actually benefit from the development as the phones that Apple does sell tend to be higher end.
There were a few incoming comments from members that sowed some doubt that Cook was telling the full story. How can U.S. consumers be balking on iPhone purchases when the jobs picture is so strong?
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Alphabet Earnings, Pichai Comments on Google's Mobile Search Deals, Microsoft Earnings
Hello everyone. We wrap up Big Tech earnings reviews with Alphabet and Microsoft. There are a handful of earnings from smaller companies worth going over – we will do that at some point next week. We kick off today’s update with Neil’s thoughts on Alphabet’s 1Q23 earnings. The update goes over Sundar Pichai’s comments on Google’s various services partnerships with Android OEMs as well as Apple for mobile search. We conclude with a look at the main takeaways from Microsoft’s FY3Q23 earnings.
Let’s jump right in.
Alphabet Earnings
Alphabet reported 1Q23 earnings back on April 25th. From a financial perspective, results were good. In a quarter that won’t be remembered for any particular financial line item, Alphabet reported $17B of free cash flow. That is testament to Google’s ad machine kicking off an incredible amount of cash quarter in and quarter out. The company possesses some of, if not the most, valuable pieces of digital real estate. As seen with a growing list of much smaller companies, most other ad-funded digital paths are nowhere near as attractive as Google’s.
Here are Alphabet’s major financial line items compared to those of Apple, Meta, and Amazon:
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Meta Looking at Magic Leap as AR Supplier, Meta’s AR/VR Positioning, Apple Reality Headset BOM
Hello everyone. Welcome to a new week.
The news flow related to AR/VR headsets is picking up. Apple is widely expected to unveil its entry into the space in just two weeks at WWDC. My assumption continues to be that Apple’s headset will be unveiled as a “one more thing” at the end of an already-packed WWDC presentation (pre-recorded). The unveiling will likely kick off a wave of stories, tidbits, and related topics in the subsequent months. In today’s update, we kick things off with Neil’s thoughts on Meta reportedly looking to partner with Magic Leap for AR IP and contract manufacturing. The discussion then turns to Meta’s positioning in AR/VR with Apple about to enter the space. We conclude with chatter regarding the bill of materials (BOM) for Apple’s Reality headset.
Let’s jump into today’s update.
Meta Looking at Magic Leap as AR Supplier
Over at the Financial Times, here are Hannah Murphy and Patrick McGee:
“Facebook’s parent company is in talks to create a multiyear agreement with augmented reality start-up Magic Leap, as the social media giant continues to pour billions of dollars into its ambition to create an avatar-filled online world called the metaverse.
According to people familiar with early discussions, Meta is exploring ways in which Magic Leap could provide both intellectual property licensing and contract manufacturing in North America to help it build mainstream AR products.
Magic Leap produces custom components, including high-tech lenses and associated software, which are key technologies that may be required to build a metaverse. However, people with knowledge of the talks said the partnership is not expected to yield a specific joint Meta-Magic Leap headset
Two former employees said Magic Leap’s ‘biggest asset’ is the sophistication of its ‘waveguides’ — technology that allows thin glass in front of the user’s eyes to conjure up realistic images at different depths.”
Interesting timing for this news to come out just two weeks ahead of Apple’s headset unveiling. Up to now, Meta has garnered quite a bit of mindshare in the AR/VR space. That is going to change once Apple officially moves into the space. Since we are likely looking at a multi-month window between product unveiling and release, Meta would be right to be concerned about Apple freezing large swaths of the AR/VR market.
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