Apple Eyes Education Market, Should Google And Microsoft Fret?

Apple AAPL is now refocusing on strengthening its footprint in the education technology market. The company is set to host an education-focused event on Mar 27 after a long gap of six years.

Apple used to be a dominant player in the EdTech industry on the back of its iPad and Mac computer offerings. However, along with Microsoft MSFT, Apple lost market share with the introduction of Alphabet's GOOGL lower-priced Chromebook.

Per Future Consulting, Apple had a 50% share of the education market in 2012 while Google with its nascent Chromebook had merely 1%. By 2015, the tables had turned with Google holding 50% of market share.

Per its latest report, Chrome OS continues to hold a majority share in the U.S. K-12 Mobile PC Market with 58.3% of devices shipped in 2017. However, in terms of global shipments of devices by OS, Microsoft's Windows maintained its top position in the year.

In a year's time, shares of Apple have gained 23.9%, outperforming S&P 500's rally of 14.4%.  We believe that Apple's renewed focus on expanding its education ecosystem will intensify competition among these tech behemoths and improve the company's market share in 2018.

Why Should Google and Microsoft Take Note

Apple is diversifying its revenue streams. Of late, the company's strategy has been to identify new revenue sources like original programming that can boost its Services business.

Although Google dominates the EdTech market, followed by Microsoft, we believe Apple's renewed enthusiasm can boost the iPhone maker's market share.

We expect the company to bring cheaper products for the education market as well. Notably, the launch of a low cost iPad in the second quarter of 2017 resulted in an uptick in iPad sales, which was falling previously.

Moreover, to generate new revenue streams, the company is working on developing more innovative products. Apple thus may come up with a 2-in-1 product to counter competition from similar offerings from Microsoft and Google.  

It is widely perceived that Apple users refuse to switch to any other platform that isn't running on iOS. Given the brand loyalty that it enjoys, it would be a significant threat to Microsoft and Google. Both the companies are witnessing a slowdown in growth.

Other Initiatives to Boost Brand Value

Apple's interest in education is evident from the number of initiatives taken by the company over the years. To foster education, the company launched classwork management app, Classroom and iTunes U for viewing lessons.

Moreover, the company's app development training initiative in Swift programming language also enables students to enhance their coding skills and place them better in a highly competitive job market.  To achieve this end, the company is also collaborating with universities to create design laboratories. Apple's Everyone Can Code initiative is also gaining traction among K-12 schools across the country.

Apple launched an upgraded version of education-focused iPads. It has also teamed up with schools to offer the devices to students free or at a subsidized rate.

The company believes that iPad Pro launched in June 2017 with its ProMotion technology is the most effective tool for teaching purposes. Notably, per market research firm NPD, in the U.S. tablet market, iPad accounted for 46% share in the December quarter, up from 36% in the year-ago period.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report