Apple (AAPL) Unveils Free OS at iPad Event, Microsoft (MSFT) Drops

NEW YORK (TheStreet) -- Though much of what Apple (AAPL) revealed at Tuesday's event was as expected, one surprise takeaway was the tech giant revealing that its updated operating system OS X Mavericks and productivity suite iWork will be available free of charge.

Along with its launch of the iPad Air and iPad Mini, the iPhone maker announced that the refreshed operating system will be available for download immediately through the App Store, free to Mac users with OS X Moutain Lion- or Snow Leopard-enabled hardware. For OS X Server (a multi-user business platform), there is a $19.99 upgrade charge.

Unlike rival Microsoft (MSFT), which sells Windows 8.1 and Pro for $120 and $200, respectively, at retail, Apple seems content with its strategy of giving the intangibles away for free to drive hardware sales. In response, Microsoft shares dropped 1.17%, with its biggest falls of the day coinciding with the Apple event.

Mavericks, modeled on the iOS 7 for the iPhone and iPad, introduces 200 new features, including iBooks (which syncs a user's books and reading activity across all iCloud devices) and Apple maps. It also improves the performance and battery life of the Mac.

"We want every Mac user to experience the latest features, the most advanced technologies and the strongest security," said Craig Federighi, Apple's senior vice president of software engineering, in a statement. "We believe the best way to do this is to begin a new era of personal computing software where OS upgrades are free."

Shares of the Cupertino-based company dipped 0.29% at market close, but have since gained 0.25% in after-hours trading.

TheStreet Ratings team rates Apple Inc as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about its recommendation:

"We rate Apple Inc (AAPL) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AAPL's revenue growth has slightly outpaced the industry average of 0.7%. Since the same quarter one year prior, revenues slightly increased by 0.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • AAPL's debt-to-equity ratio is very low at 0.14 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, AAPL has a quick ratio of 1.54, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 41.67% is the gross profit margin for APPLE INC which we consider to be strong. Regardless of AAPL's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, AAPL's net profit margin of 19.53% compares favorably to the industry average.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Computers & Peripherals industry and the overall market, APPLE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • APPLE INC's earnings per share declined by 19.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, APPLE INC increased its bottom line by earning $44.16 versus $27.67 in the prior year. For the next year, the market is expecting a contraction of 10.8% in earnings ($39.38 versus $44.16).

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