By Tim Higgins
Apple Inc. Chief Executive Tim Cook on Monday began the iPhone maker's annual weeklong developer conference, an opportunity to highlight the company's software prowess as investors worry about slowing gadget sales, rising inflation and a resurgence of Covid-19.
The event is being held mostly online via the company's website. Apple has invited a few people to participate in person at its headquarters in Cupertino, Calif., where they must meet certain conditions around vaccinations and testing. Before turning to a pre-recorded presentation, Mr. Cook greeted the crowd gathered outside in person, saying, "It's so wonderful to see you."
The conference is expected to focus on the latest versions of Apple's software for the iPhone, iPad and computers before it is released this fall. The day began with the unveiling of the latest version of the iPhone operating system, iOS 16, that will have new personalization features for the lockscreen, allowing different styles and colors, and notifications will roll in from the bottom in an effort to avoid clutter.
Two years ago, as the global pandemic was shutting down daily life for many, Apple helped set the tone for virtual events around the world as it transitioned its large-scale convention-center event to a virtual one. The company served as an example to other companies and organizations taking their first steps into the new world of remote events.
The pandemic helped fuel record profit for Apple as workers and students bought laptops, iPhones and tablets to augment their stay-at-home experience. The company's first iPhone with 5G cellular-data capability generated record sales of $191 billion in the past fiscal year, which ended in September.
Hurt by parts shortages and factory shutdowns in China related to Covid safety precautions, iPhone sales are expected to be stagnant this quarter compared with a year earlier. In total, analysts surveyed by FactSet on average predict iPhone revenue to rise 6.2% this fiscal year, after climbing 39% in 2021.
Apple's biggest area of growth this year is expected to come from the services category, which includes money generated from the App Store and Apple's ad business. Services sales might rise nearly 17% to $80 billion. That would be more than the combined sales of iPad and Mac computers, and rank second to Apple's iPhone business.
A significant part of that business comes from videogames offered through the App Store. Videogames could play an important role in helping usher in Apple's next hit product. Close Apple watchers will be looking on Monday for any hints regarding the company's planned extended-reality headset. Production of the device is expected to begin later this year or early next year, and would bring about Apple's most highly anticipated new product since the introduction of its Apple Watch in the fall of 2014.
The headset isn't expected to debut during Monday's keynote, while Apple might reveal a new version of its MacBook Air laptop.
By its very nature, Apple's Worldwide Developers Conference, known as WWDC, never commands as much attention as an iPhone event, yet the new software features and policies unveiled can have far-reaching effects. In 2020, for example, Apple announced a new privacy feature that required all app developers to get permission from iPhone users to track their internet use. Most of those users have declined, roiling the businesses of Meta Platforms Inc.'s Facebook and the broader ad-tech industry built on messages targeted at people based on that data.
In recent weeks, Apple has run a high-profile television ad, including during the National Basketball Association's playoff games, highlighting its features aimed at protecting user privacy.
The latest privacy marketing campaign comes as some developers and lawmakers around the world are questioning the power Apple holds over the distribution of software on its iPhones.
The European Union is nearing final approval of legislation that would open the door to software being downloaded onto Apple devices outside of the company's App Store, which collects as much as 30% of sales of in-app purchases. The U.S. Congress is debating a similar measure, but such legislation faces an uphill battle ahead of November's midterm elections.
In an April speech, Mr. Cook said such efforts would weaken iPhone privacy, allowing social-media companies to circumvent Apple's new privacy tools.
Write to Tim Higgins at tim.higgins@wsj.com
$(END)$ Dow Jones Newswires
June 06, 2022 13:24 ET (17:24 GMT)
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