Apple’s new feature will allow iPhone users to contact emergency services via satellite, even if … [+]
Key Takeaways
- Apple has announced the ability for iPhone 14 users to sent emergency SOS messages via satellite, even if their outside cell or WiFi service range
- They’ve committed $450 million to build the infrastructure for the service, which includes the option to purchase a material stake in private satellite company Globalstar
- Along with the announcement of the Apple Watch Ultra, it appears the company could be making a serious push into the outdoor recreation sector, which is worth almost $700 billion a year in the US alone
As is the case every year, all eyes were on the Apple event last week as they announced their latest iPhones, Macs, iPads and software updates. The event may not have the same hype as years gone by (no one’s sleeping on the sidewalk for the iPhone 14), but it’s nevertheless a key insight to Apple’s upcoming plans.
Generally, the new features announced showed incremental improvements and upgrades across the board, but there was a thread woven through some of these announcements that provided some clues on one of Apple’s next growth areas.
That is, the adventure and outdoors market.
For some time now, it’s been rumored that Apple would be adding the ability for iPhone users to send messages via satellite, and this feature was finally announced at last week’s event.
They have arranged a partnership with satellite company Globalstar, which will allow iPhones to sell short, emergency text messages even if the user is outside cell range.
This may seem like a minor feature but it could have massive implications for the outdoor recreation industry. This is particularly true when combined with the introduction of their new Apple Watch Ultra.
Globalstar and outdoor watch market leader Garmin’s
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Apple’s new satellite features explained
The new feature allows intrepid adventurers outside of WiFi and cell phone range to send an SOS text message to emergency services. This service is not designed to be used for hikers to tell their partners to restock the beer fridge or to order pizza, it’s reserved for people who are in actual danger and need emergency assistance.
The phone will initially attempt to connect to emergency services via traditional methods, i.e. through cell signal or WiFi. Even if a user’s phone carrier has no signal, other carriers can be used to contact 911.
If this connection fails, the iPhone will connect to a Globalstar satellite, and relay the users information such as location, medical information and remaining battery life. It can also be set up to notify your personal emergency contact that you’ve contacted 911.
The feature will only be available on iPhone 14, and at launch it will only be available in the United States and Canada.
Dedicated satellite phones have been around for a long time, but they’re expensive to buy and use and generally have only been used by adventurers who are truly going off the grid.
This update sees some of the basic technology from these dedicated devices become available to anyone who owns the latest iPhone.
The deal between Apple and Globalstar
Apple is going to be putting up $450 million to get this new feature off the ground, with the majority of that being paid to Globalstar in a deal that will allow Apple to acquire a percentage of the company.
This sounded like great news for the company, until it became clear that Globalstar would need to borrow millions of dollars on top of Apple’s investment.
This is a concern for a company that already has net debt of $350 million against revenue of around $140 million over the past 12 months.
Apple is also going to be offering this service to iPhone users free of charge. Now, you’d imagine there aren’t going to be that many people each year who need to contact 911 when they’re out of cell phone range, so that would suggest that the revenue flowing to Globalstar isn’t going to be that significant.
With that said, the fact that they’re spending $450 million in getting the satellite infrastructure in place suggests that there are bigger plans for the future of space.
There are already a number of companies vying for ownership of the stratosphere, with Elon Musk’s Starlink one of the major players, as well as Lynk Global and AST SpaceMobile.
It’s clear that Apple is eager to allow their users to get off the beaten track, yet still stay connected.
Should Garmin be worried about the Apple Watch Ultra?
Further bolstering this push is the release of the new Apple Watch Ultra. It’s larger, tougher and more expensive than any of the previous Apple Watches, and it’s aimed squarely at the ‘premium’ fitness watch category dominated by Garmin.
It’s a strange position for Apple to be in, given that the rest of their product line is aimed squarely at the premium end of the market. When it comes to fitness watches, the likes of the Garmin Enduro series can reach well over the $1,000 mark.
With the higher price point comes advanced mapping, heart rate and fitness features, as well as greater durability and better battery life.
It makes the regular Apple Watch range, which starts at around $250, seem like a relative bargain.
While the original Apple Watch was designed to cater to young professionals, casual joggers and busy moms and dads, the new Ultra (along with many Garmins) is aimed squarely at marathon runners, triathletes, hikers and mountain bikers.
Right now, the new Ultra still falls far short for die hard adventure lovers, but it brings the series closer than ever to ending up on the wrist of trail athletes around the world.
The ace up the sleeve for Apple could be the new satellite capability. While the feature isn’t going to be available on the Apple Watch for now, it’s not difficult to envision it being added to future versions.
With the ability to use Apple Watch as both a regular phone over a cellular network, and potentially as a satellite communication device in the future, it could provide outdoors enthusiasts and athletes with a compelling package that sits right on their wrist.
However, there’s also something to be said for Apple increasing the pie for companies already in the space. You might expect Garmin’s stock to have plummeted on news that Apple had a new competitor product for their higher end watches, but the opposite happened.
Garmin’s stock has fallen significantly so far this year, but it actually bounced 3% on the news of the Apple Watch Ultra.
It could be that marketing dollars being spent by Apple to highlight the benefits of a rugged, outdoors-focused watch could bring more awareness to the product segment as a whole, which could work in Garmin’s favor in the long run.
It remains to be seen just how far Apple plans to push into this space, and just how much of an impact it will have on Garmin’s bottom line.
The market potential
Putting this all together, it’s becoming a compelling story for a push by Apple into the outdoor recreation sector. Unless you already run or bike the trails every weekend, you might be surprised at the sheer size of this market.
Garmin’s market cap currently sits around $18 billion. That’s similar in size to other major global companies like Spotify, Coinbase and Best Buy
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According to the Bureau of Economic Analysis, the outdoor recreation sector is worth $689 billion and contributes 1.8% of U.S. GDP. Astonishingly, that makes it a bigger industry than mining, utilities, farming and ranching and chemical manufacturing.
Obviously Apple won’t be going after that whole industry, unless the rumors of the Apple Car turn out to be the Apple Canoe instead, but it gives some indication as to the scale of the opportunity within the space.
What does this mean for investors?
The investment landscape is such that we have major companies at the top of the tree that can enter, and dominate, a new market whenever they please. A $450 million investment might sound like a lot of money, and it is, but it represents just 0.22% of Apple’s current cash reserves.
That’s the equivalent of someone with $100,000 in the bank spending $220. Sure, it’s not nothing, but it’s really not a big deal either.
We only need to look at what they did to the rest of the smartphone market when they invented the iPhone. Multiple billion dollar companies like Blackberry and Nokia all fell by the wayside.
It’s a point worth noting for investors trying to pick individual stocks. No matter how good a business is, something could always come around the corner at any minute to change their fortunes.
It’s why diversification is so important.
That’s never been more important than now, with an economy thats sputtering and inflation that remains stubbornly high. When economic growth is low, or even negative, big companies tend to outperform small ones.
They tend to have more cash on hand, more stable revenue streams, more diversified sources of income and less reliance on growth to meet their objectives.
It’s why we created the Large Cap Kit, which uses a sophisticated pair trade to go long on large companies and short on small and medium sized ones.
This means that as long as large companies perform better than small or mid-sized ones, investors can profit regardless of whether the overall market is up, down or sideways.
It’s the type of trade that’s usually reserved for high flying hedge fund clients, but we make it available for everyone.
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