Apple organized the event in San Francisco on Wednesday where they presented wireless earphones called “AirPods.” They will come out in October, and the retail price will be $159.
The 3.5-milimeter analog headphone jack was part of the previous headphones, but it has been removed from the new set. These “AirPads” are supposed to go with the new iPhone7.
However, this luxurious item wreaked havoc in the newsroom and after the conference, someone said:”They’re going to make you pay $159 if you lose your headphones!” One may interpret this high price as the last level of customer abuse.
Anyway, this is not entirely true. The wired set of headphones will be sent to the buyers with every bought iPhone7, just like before. The only difference is that now they will only work if you plug them into the little socket located in the middle of the bottom also known as the “Lightning” port. So, new, expensive “AirPods” are not a necessity.
However, the Street eagerly questions what will happen to the new Apple headphones. Even Jeffrey Kvaal with Nomura who holds a buy rating on Apple stock was slightly burdened with the high price, although he was thrilled with the design of the headsets. According to his words, AirPods are:”very stylish and very futuristic, the $159 price tag seems a bit steep”.
Timothy Arcuri, the leader of the Cowen & Co., is also a shareholder and he thinks that Apple could make $2.5 billion per year on these headphones. He wrote:” The elimination of the headphone jack and introduction of wireless headphones (AirPods) was also expected (although it surprisingly didn’t make the phone any thinner), but these are not your run-of-the-mill wireless earbuds; most users still may be happy w/the standard earbuds, but the $159 price point is high enough that even ~15-20% attach rate (~15-20MM units by CYE16) is ~$2-2.5B incremental revenue – enough to move the needle more than any other accessory in the company’s history and help to fill what today appears to be a ~$3-5B shortfall b/ w iPhone builds and current Street revenue for FQ1:17 (Dec).”
In pre-market trading, the shares of Apple dropped 0.6% or 60 cents.
Simona Jankowski of Goldman Sachs is also interested in the headset, and her opinion is similar to Arcuri’s. As Jankowski stated:” We find that every 10% increase in AirPod attach relative to iPhone 7 and 7 Plus sales equates to approximately $2bn in incremental revenue for Apple. Our calculation assumes that 60% of our 231mn total iPhone estimate in FY17 are either the 7 or the 7 Plus (note that we do not explicitly model by SKU). We also use the $159 ASP within our analysis.”
She also has a buy rating on Apple Shares.