Apple Sharpens Focus by Dropping Wireless Router Business

Apple (AAPL) has reportedly decided that the wireless router business is no longer worth its time, sources told Bloomberg.

The Cupertino, Calif.-based technology company has been working for the past year to split up its wireless router unit, and has begun to move engineers from the business into other segments including the Apple TV team, the sources noted.

Apple hasn't offered a refresh for its routers since 2013. The company debuted the product in 1999 and currently sells three versions: the AirPort Express for $99, AirPort Extreme for $199 and AirPort Time capsule for $299. Breaking up the router team signals that Apple won't be making any new versions of these products, Bloomberg said.

The router offerings, as well as Apple Watch, Apple TV and several other products, make up Apple's "other products" segment. "Other products" generated $11.1 billion in revenue for the fiscal year 2016 ending in September, while the company generated a total of $215.64 billion in revenue for the year.

Apple's reported move out of the business comes as Oppenheimer & Co. analysts on Monday downgraded Apple, suggesting the company may be lacking innovation over the next several years.

"I wanted [Apple] to buy Harman International (HAR) - I've wanted them to buy so many different things," said Jim Cramer TheStreet's founder and manager of the Action Alerts PLUS portfolio, which owns AAPL. "Apple is spending a lot on R&D and I don't think that they are being idle."

While Apple is pulling out of some hardware business, Mountain View, Calif.-based Alphabet (GOOGL)  is actually stepping up its hardware investments. The Google parent launched its first router offering in 2015 and revealed a new router device called Google WiFi during its October keynote event this fall. The company began taking orders in November for the new router, which costs $129 a pop, and shipments will begin in December.

Apple and Google are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells AAPL and GOOGL? Learn more now.

During the October announcement, Alphabet also revealed a new "Pixel" smartphone, as well as the "Home" smart speaker and the "Daydream View" virtual reality headset.

JMP Securities analysts Ronald Josey, Andrew Boone and Shweta Khajuria said in a note following the event that many of Alphabet's new products are "a catch-up of sorts to devices currently on the market," but the new offerings could position the company well "as engagement expands across devices and increasingly through voice and AI." The new hardware products have also put Google more directly into competition with Apple and Amazon (AMZN) .

By contrast, Apple has been looking to streamline. Alongside the rumored end of Apple's router line, the company also stopped manufacturing its only external monitor, the Thunderbolt Display, this summer. In October, Apple began collaborating with South Korean electronics company LG Electronics as a third-party maker for external displays.

Although the moves allow Apple to focus more heavily on its core offerings such as the iPhone, iPad and Mac - which made up about 84% of Apple's total sales in fiscal 2016 - Bloomberg noted that eliminating the router business could make the Apple ecosystem less "sticky."

Some of the features in the company's routers will only work with other Apple products. Without the router, some customers could have less incentive to remain users of Apple phones or laptops, Bloomberg reports.

Apple shares closed up 1.52% Monday to $111.75. The shares are up about 6% year-to-date. Alphabet stock is up about 1% so far this year.

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