Apple (AAPL) - Get Report is pushing to continue its dominance of the wireless earbud space, rolling out a new premium version of its popular AirPods that will sell for $249, $90 more than the previous version.
In a press release on Monday, the tech giant said the new AirPods, called AirPods Pro, will go on sale Oct. 30 and are available for pre-order today. Apple shares were up 1% on Monday to $249.05.
Unlike the base version of of the earbuds, the new AirPods Pro come with noise cancellation technology that's comparable to premium earphones made by others such as the Apple-owned Beats Studio lineup, Bose and others.
The noise cancellation feature is made possible by an external microphone, which detects outside sound, according to Apple's announcement. The AirPods Pro incorporate "anti-noise" to cancel out the external sound, Apple said on the product's website. The AirPods Pro also come with three sizes of interchangeable silicone ear tips geared at improved comfort and fit.
Other features include "sweat resistance" for those using the earbuds for exercise, the same Siri integration as base level AirPods, and a battery life of 5 hours (4.5 hours while using the noise cancellation feature). The earbuds charge inside the carrying case, which extends the battery life to 18 hours, according to Apple.
"We view the new iteration as a strong update thanks to the added noise cancellation feature and believe it could serve to incentivize upgrades in a way the second iteration couldn't or bring new users that place heavy importance on noise cancellation into the fold," said Zev Fima, an analyst with Jim Cramer's Action Alerts Plus portfolio.
Along with Apple, other tech giants have been crowding into the premium earbud market. Amazon (AMZN) - Get Report recently announced a set of earbud called Echo Buds, which features Amazon's popular Alexa assistant. And Microsoft (MSFT) - Get Report also announced an earbud called Surface Buds, geared at enterprise use cases such as dictation and integration with Microsoft's Office 365 suite of productivity software.
Apple is currently the undisputed market leader in the fast-growing "hearables" market, with an estimated 50% market share according to IDC. Samsung is a distant second at 10% share, followed by Chinese device maker Xiaomi (6.5%) and Bose (5.7%) as of September 2019.
Evolving beyond just devices for listening to audio and taking phone calls, the emerging category of smart, wireless earbuds are intended as a two-way channel that places virtual assistants directly in users' ears. The assistants can typically be activated using the microphone.
"Putting that computing power in your ear with an intelligent agent is strategic to these companies," analyst Patrick Moorhead of Moor Insights & Strategy told TheStreet.
For Apple, AirPods are part of a growing top line stream as the company shifts away from relying primarily on iPhone sales as a source of revenue.
For the second quarter, Apple CEO Tim Cook told investors that wearables sales grew "well over 50%" year-over-year, a category that also includes the Apple Watch. Apple's wearables, accessories and home business posted $5.1 billion in revenue in its August earnings report, which came as positive news for investors. Wearables have a stronger margin profile compared to Apple's other hardware products.
The new AirPods Pro further support growth in the wearables segment, Fima added.
"Between the Apple Watch, AirPods and potentially an announcement on augmented reality glasses in the near future we think the Apple ecosystem is as strong as ever and the switching costs are only increasing," he said. "Ultimately, we think this all adds up to a hardware lineup that has a shorter refresh cycle than the iPhone on its own and an increasing number of ways for developers to take advantage by offering new apps and services...further bolstering Apple's higher margin Services revenue."
Apple shares are up 57% so far this year.
Apple, Amazon and Microsoft is a holding in Jim Cramer'sAction Alerts PLUS Charitable Trust Portfolio.
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