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What's Up Apple's (AAPL) Sleeve With Xnor.ai Purchase?

Posted on Thursday, January 16th, 2020 by Steve Anderson

Whats Up Apples (AAPL) Sleeve With Xnor.ai Purchase?

Back during the early 2010s, it was a common pastime—and frequent article topic—for tech bloggers to consider Apple (NASDAQ: AAPL) patents to look for possible future directions in which the company was considering proceeding. Not all patents made it to finished states, of course; that's just the nature of the patent beast. Sometimes, though, some exciting new directions could be derived from the patent study. Apple's most recent move is perhaps even more exciting because it cost the company around $200 million, which pretty much guarantees it will be doing something along this line.

A Nine-Figure Deal With Uncertain Results

The move-in question is Apple's purchase—valued at around $200 million—of Xnor.ai, a startup company that focuses on artificial intelligence (AI) tools that don't require a lot of power on which to operate. While Apple was playing the report pretty close to the vest, not commenting much on the arrangement beyond the standard boilerplate of how, sometimes, Apple buys smaller technology companies and doesn't talk about what it has in mind by so doing, looking more closely at Xnor.ai itself provides possibilities more exciting than those of patents.

While the $200 million price tag is approximate, reports at TechCrunch suggest that the company raised just shy of $15 million in venture funding over two years: a $2.7 million funding round early on in 2017, followed by a substantially-larger $12 million round in 2018. It's interesting that funding quadrupled in the space of a year or so, suggesting that Xnor.ai had something noteworthy on its hands.

So Why Xnor.ai, Anyway?

Since we know that Xnor.ai focuses on low-power AI tools, we can make a reasonable inference that whatever is coming out of this deal, it's going into the iPhones and possibly iPad lineup. Low-power tools are tailor-made for mobile devices, which have a finite power supply they carry around with them.

It's also known that Xnor.ai also deals in image recognition systems, which works well with one of the primary features of any iPhone: the camera. In fact, this dovetails well with other reports that suggest that the next iPhone will boast not only an enhanced FaceID sensor, but also the ability to scan 3D images.

Thus, what we're left with is a set of reports that suggest the next line of iPhones won't just be dependent on 5G connectivity to make their value proposition, but rather, also a particularly enhanced new camera system.

Meet the New Apple Enthusiasm, Same as the Old Apple Enthusiasm?

One thing we know from watching Apple in recent months is that Apple had one major problem on its hands: a perceived lack of innovation. Apple was a company that was perhaps best-known for its innovative skill, bringing out new and different and game-changing with almost every announcement. Naturally, innovation like that isn't sustainable for any great period, and there was already unpleasant buzz that the well had run dry for Apple, at least temporarily. With “peak smartphone” starting to look like a thing, and the crowds around the Apple Stores starting to thin out with each new iPhone that looked suspiciously like the last iPhone, some were starting to wonder if Apple's hardware drive was losing power.

While we've seen some very exciting projections about Apple's immediate future, many of these hinge on the outcome of the burgeoning 5G network. If the 5G network gets up and running to its fullest, Apple's new cameras and AI tools will likely be icing on the cake, nifty little additions to throw that extra gee-whiz factor into future sales.

If the 5G rollout doesn't proceed as quickly as some would like, or rather hope, then Apple's new technological marvels might fill in the gap of interest. It's a worthwhile backup value proposition; Apple can look at its consumer base and say, sure, 5G connectivity is still a big “coming soon”, but until then, you've got this awesome new camera to work with! And by the time anyone gets bored with the camera, 5G will probably be in play, and that solves that problem.

One of the biggest problems Apple faced boiled down to convincing people it was still worthwhile to buy a new iPhone annually. 5G was definitely going to have a hand in it this go-round, but with Xnor.ai's purchase, we may see a whole new reason to buy both Apple devices and Apple stock alike.

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