Apple CEO Cook: Mobile payment technology still 'in its infancy'


Don't look for Apple (NASDAQ:AAPL) to roll out mobile payment services anytime soon: The segment is still not ready for primetime, according to comments made Tuesday by the computing giant's CEO Tim Cook.

Speaking to analysts after Apple announced its fiscal 2013 second quarter results, Cook said the company is at work on "new hardware, software and services that we can't wait to introduce this fall and throughout 2014," but did not divulge specific details. "In terms of just the payment market specifically, do you feel that that market is well addressed today with the offerings out there?" asked Piper Jaffray Analyst Gene Munster, prompting Cook to respond "I think it's in its infancy, Gene. I think it's just getting started and just out of the starting block."

Cook's comments appear likely to squash speculation that Apple will finally integrate mobile payment support into the next edition of its iPhone, expected to reach retail later this year. Its most recent smartphone, the iPhone 5, introduced Passbook, a virtual wallet that stores and updates boarding passes, retailer loyalty cards and movie ticket apps, but not digital payment capabilities.

Many onlookers anticipated the iPhone 5 would incorporate Near Field Communications-enabled payment support, speculation fueled by leaked photos allegedly depicting the device's front assembly, complete with NFC chip. The Wall Street Journal also reported that in 2011, Scott Forstall, then Apple's head of iPhone software, assigned members of his team to work on a comprehensive wallet application, while hardware staffers investigated contactless technologies including NFC and Bluetooth. But lingering questions over security, payment processing and retailer adoption ultimately scuttled the project, and insiders said that during an executive review, Apple CFO Peter Oppenheimer even asked if there is a newer, Web-based technology more secure than NFC.

Apple is rarely the first mover into new technologies and market opportunities. "Apple is always a comfortable number two," Munster told the Journal in mid-2012, citing the company's belated but successful entries into businesses like smartphones and MP3 players. "They let their competitors do their market research for them."

If and when Apple does enter the mobile payments space, it will compete against services including NFC-based Google (NASDAQ:GOOG) Wallet and Isis, spearheaded by Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T) and T-Mobile USA. eBay-owned PayPal is trialing mobile wallet services across close to 20,000 U.S. retail locations, and Merchant Customer Exchange--a proposed nationwide mobile commerce network spearheaded by retailers including Walmart, Target, Best Buy and 7-Eleven--is currently building a mobile wallet in collaboration with digital security firm Gemalto.

Apple sold 37.4 million iPhones and 19.5 million iPads in its fiscal 2013 second quarter, which ended March 30, beating analysts' expectations of around 35 million iPhones and 17 million iPads. In the year-ago quarter, the company sold 35.1 million iPhones and 11.8 million iPads. In all, Apple posted quarterly revenue of $43.6 billion and quarterly net profit of $9.55 billion, down from $11.62 billion in the year-ago quarter--its first quarterly profit decline in a decade.  

Apple's reported record quarterly iTunes revenues of $2.4 billion, up 28 percent year-over-year, highlighted by new quarterly revenue records for iOS apps, music and movies. Cumulative app downloads have now surpassed 45 billion and app developers have earned App Store revenues in excess of $9 billion, including $4.5 billion in the most recent four quarters alone.

Cook said Apple will continue to invest in the iOS ecosystem, promising new features and capabilities are in the pipeline. "Because we are not fragmented like our competition, we can update an iOS with a major release and a substantial percentage of our customers will update to [our] latest offer," Cook said, taking a shot at Google's rival Android OS. "We've made that very elegant and very easy. Also because the usage for iOS is so much higher, when we integrate things well, people use them a lot more and so just those concepts by itself are huge advantages from a customer experience point of view."

For more:
- read this Seeking Alpha transcript
- see this FierceWireless article
- read this CNet report

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