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TheStreet Open House

Apple iPhone Ad Sets Tone for Smart Home Products in the Pipeline

Stocks in this article: AAPLNFLXHONTXNPHG

NEW YORK (TheStreet) -- Though Apple (AAPL) is pushing the iPhone with its latest series of ads, it appears as if the company is paving the way for what's to come in the company pipeline.

The new ad, dubbed "Parenthood," is an iPhone-centric ad that focuses on families using smart home products in everyday life. In the ad, Apple demonstrates that the iPhone can be used to record a home video, find a lost dog, monitor your children, or turn off the lights in the house. This ad follows one earlier in the month, named "Strength," which focuses on the health and fitness market, showing people swimming, running, playing golf, lifting weights as well other activities.

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The ad follows Apple's introduction of its HomeKit as part of iOS 8, the company's new mobile operating system, to be released in the fall. HomeKit will allow users to integrate computing hardware with smart appliances. Currently, there are a few partners for HomeKit, including Honeywell (HON), Texas Instruments (TXN), iHome, Phillips (PHG) and others.

According to Apple's Web site, "HomeKit is a new framework for communicating with and controlling connected devices in a user's home. Apps can enable users to discover devices in their home and configure them, or you can create actions to control those devices. Users can group actions together and trigger them using Siri." HomeKit will allow locks, lights, doors, thermostats, garage doors and other home-centric items to integrate into an iPhone or an iPad, using Siri to operate them.

With HomeKit, Apple appears intent on grabbing some of this additional revenue, as it seeks to make the use case for the iPhone, its largest revenue driver, even greater. "Although the Wall Street view is that smartphones are mature, there is plenty of innovation left in their use," wrote UBS analyst Steve Milunovich in a research note earlier this month. "When technologies are new, integration is key to user acceptance. Tim Cook underscored that Apple engineers platforms, services, and devices together, its primary competitive advantage. The iPhone increasingly acts as a digital hub, as with the HomeKit platform." Milunovich rates Apple shares a "buy."

Apple could not be reached for comment for this story.

A research report from Juniper Research forecasts that revenue generated from Smart Home services is set to reach a global market value of $71 billion by 2018, rising from $33 billion last year. Of the $71 billion, nearly 80% is expected to come from "entertainment services," notes Juniper, led in part by content providers such as Netflix (NFLX), LOVEFiLM, and Amazon Instant Video, which have helped fuel the demand for connected TVs and the set-top box market, where Apple is the leader, with its $99 Apple TV.

Apple does approximately $170 billion a year in revenue, and any move into the smart home market, though it would not be as large a revenue driver as the iPhone, may wind up being noteworthy, especially as the market grows over time.

--Written by Chris Ciaccia in New York

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